How Can You Raise Sales 5-15%?

Corner Office | By Deborah L. Cohen

Overseas Brand Savvy
Register your brand’s name abroad to save time and headaches down the road.
Registered trademark important for restaurants growing overseas

In recent years, Firehouse Subs, a quick-serve largely unfamiliar to customers living outside the southern U.S., has become an international brand.

Even though the fast-growing sandwich chain operates only 347 domestic stores in 15 states, it has progressively extended its global reach, taking pre-emptive steps to register its trademark in markets as far-flung as China, Russia, Georgia, and South Korea.

“We decided to grow this business, and one of the investments we have to make is in trademarks,” says Robin Sorensen, co-founder of the privately held Jacksonville, Florida–based company. “We sat down with our attorneys and said, ‘Let’s start. Let’s get everywhere we can and file it.’ ”

Firehouse Subs’ business plan calls for overseas expansion in three years. But if the right franchise partners for a particular foreign market come along before that time, Sorensen says, the company will be well positioned to take advantage of the opportunity.

In addition, obtaining overseas trademark rights provides additional value for the company’s brand, should management ever decide to sell to a larger international restaurant company.

“Having countries and regions covered like the European Union, Canada, Mexico, Spain—those are areas that a lot of bigger chains are operating in,” Sorensen says, stressing that his company in not for sale. “That’s not why we did it—but it’s a benefit.”

Meantime, Firehouse Subs has a leg up on an often-unwieldy process fraught with unforeseen legal roadblocks. Economic globalization, the proliferation of the Internet, and increased awareness of U.S. brands abroad have brought the issue of overseas trademark registration to the forefront for many companies, even if they are not considering operating in international markets for several more years.

Some well-publicized infringement cases have highlighted worst-case scenarios. Starbucks’ growth into Russia, one of the fastest-growing international retail markets, was slowed considerably in 2005 when it had to do legal battle with Sergei A. Zuykov, a Moscow attorney who had purchased local rights to the coffeehouse chain’s name.

These and similar cases lend weight to the argument that smaller brands with limited resources and legal muscle should think about trademark registration defensively and plot their strategies early on.

“If you obtain these registrations and you hold them, you can prevent some of this trademark squatting,” says Richard S. Vermut, an attorney with Rogers Towers who handles intellectual property matters for clients that include Firehouse Subs. “If you weigh the costs of obtaining those registrations against the benefits … it could be a very reasonable investment to make.”

Costs vary widely, but Vermut estimates it will run a quick-serve chain anywhere from $1,000 to $3,000 to obtain rights in a single overseas market, including documentation and legal expenses. Additional uses beyond the operation of restaurants, such as the right to sell branded foods in grocery stores, add marginally to the costs, which are tied to an international classification of uses.

Vermut says restaurant companies must also pay special attention to how their brands will translate into non-English markets. In Asian countries that use a different alphabet, he recommends registering both the English language mark and also the Asian translation.

“A lot of times trademarks get adapted,” he says.

Not unlike the U.S., approval in foreign markets can take anywhere from several months to more than a year, depending on the complexity of the case and whether there are objections. In addition, trademarks typically have to be renewed within five to 10 years, depending on the country.

It’s a lot easier to register a brand overseas if the company has already obtained national registration through the U.S. Patent and Trademark Office (uspto). Firehouse Subs, which originally registered for use in the state of Florida, received national trademark rights in 1996. Beginning in 2000, when it became apparent the chain could sustain rapid growth, it began the process of adding overseas markets. Sorensen estimates the company has spent several hundred thousand dollars to date, registering its brand for uses ranging from foodservice to franchising and charitable use.

Overseas trademark registration became a lot easier after November 2003 when the U.S. added its name to a trade agreement known as the Madrid Protocol. The pact, which now includes more than 75 countries, allows the owner of a trademark to seek registration in multiple markets through a single application in one language.

U.S. applicants that already have national registrations for their trademark can apply directly through the USPTO, which has a branch set up just for foreign registration. The Madrid system is administered by the World Intellectual Property Organization in Geneva. Besides simplification, the process offers economies of scale, eliminating the need for companies to hire legal counsel in each of the local foreign markets where they seek to apply.

“The Madrid Protocol definitely provides a nice avenue for a U.S. company to obtain protection in some international markets—it sort of creates more of a one-stop shop,” says Cynthia Lynch, administrator for trademark policy and procedure at the USPTO. “You can handle the registration and maintain it in a more unified sway.”

Depending on a company’s specific operating plans, there are other ways to streamline the process. The European Union, for instance, offers a community trademark, or CTM, that allows certified registrants to operate under one license throughout all of its member countries. Other parts of the world, such as Latin America, have similar trademark coalitions.

Alan C. Drewsen, director of the International Trademark Association, a trade group that lobbies on behalf of companies doing business overseas, stresses that quick-serves might also want to consider Internet domain name registration each time they register their mark outside the U.S.

“Anybody expanding internationally would want to have a domain name policy that complemented its trademark policy,” he says. “They’d want to do it at the same time.”

Deborah Cohen is QSR’s former Finance reporter.