At a recent seminar given at Asia House, speakers from Hamlins dealt with several aspects of brand exploitation before an invited group of media and brand decision makers.
Philip Herbert, Partner in charge of Hamlins Brand Unit, chaired the seminar and dealt with the definition of a brand and what aspects of a business could be covered by this term. He explained that a brand was the elements of a business which customers found familiar and would recognise as “creating an association or expectation level of trust with the brand user”. He explained that the largest companies owned brands worth billions of pounds but there were many newcomers such as Boden and FatFace who had come from nowhere in only a few years through careful brand promotion. In order to monetise the brand, the brand owner has to have some intellectual property contained within in the brand. A mere idea cannot be protected and exploited. It is the intellectual property in a brand that is the ultimate revenue generator.
Naazneen Schmittzehe, in charge of Hamlins Trademark Unit, then explained what makes a successful trademark. She explained that trademarks could include names, logos, shapes, colours and smells, all of which could be registered, provided they are distinctive. Famous examples cited were; Orange phones, Jif lemon shapes, Apple computers and Paul Smith shirts. A name that is purely descriptive, such as “organic baby food” could not be registered, nor could marks that are identical or confusingly similar to an existing mark.
It is important to carefully select the classes in which to apply for registration and many existing brands could consider extending their registration to other classes. Naazneen explained the procedure for registration and how applications could be accepted or rejected and then published.
There are a number of brands that have successfully extended into areas quite different from their original scope of business. Good examples of this are Michelin and JCB who are now known in completely different areas from their original core business. It is essential for brand owners to undertake proper searches of other potentially competing marks and to consider registering in Europe as well as internationally under the Madrid Protocol.
Mark Copping, a corporate Partner, specialising in Franchising, then gave a talk about franchises and concessions, explaining the difference between these two methods of brand exploitation. A franchise required not only a recognised brand but also a successful business model, a body of know-how, a franchise agreement and manual and the ability to transport to other locations. There are clear choices on whether to grant master franchises, territory agreements or single franchises. Franchises are often used in difficult markets, either abroad or where specialist local knowledge is required such as airports, and the franchisor sometimes takes a share of ownership in the franchisee so as to take advantage of capital growth. They can also take the head lease. An example of this can be found in the food chain, Subway.
One of the drawbacks in franchising is the loss of control involved in allowing the brand to be used by a third party and the only way of controlling this is through the franchise agreement. This has on occasion resulted in damaging and messy litigation which could be in a foreign jurisdiction.
Concessions on the other hand tend to be shorter and more flexible. The brand owner continues to manage the business and does not have to put much capital in. However they pay a higher percentage fee for the privilege of occupying what could be a prestigious site. Concessions can be either temporary, such as a specific event, a sporting event or on one day a week.
In these difficult times, a temporary concession, which is effectively consensual, is often a great way to use unoccupied space or to take advantage of temporary conditions. The brand owner does not have the loss of brand control or a long-term commitment as required by a franchise. Internet businesses are now beginning to see the benefit of having concessions in bricks and mortar businesses.
Ian Down, Partner in Hamlins Brand Licensing Unit, then set out opportunities for brands in terms of sponsorship and endorsement as well as brand distinction. He pointed out that licensing a brand had both pros and cons. A good example of this is Marks & Spencer’s Money where Marks & Spencer had moved outside its core business to offer an add-on service but where it had eventually decided to license this to a third party rather than operate it itself, so as to reduce potential risk.
There are a variety of options on fees including fixed-fee versus variable royalties. He dealt with advances, minimum guarantee fees and royalty-free periods. The value of a licence would be influenced by the product category, territory, the nature of the investment being made by the licensee and market forces. Production consideration such as quality control and public opinion including ethical and environmental issues, as well as the need to address counterfeit risks early can also influence licence value. He also dealt with exclusive or non-exclusive licences and the ability to terminate including what happened with unsold stock and IP.
For more information on the brand services that Hamlins can offer, please contact Philip Herbert at pherbert@hamlins.co.uk
