Restaurant Franchise Issues
Tiffany Hoang is the owner of four Gong Cha franchise locations in the Greater Baltimore area. Gong Cha is an international bubble tea beverage franchise founded in Taiwan. Tiffany opened her first and most popular location in December 2019 in Hanover, Maryland. A year later, she left her day job to pursue being a full-time business owner and opened Gong Cha franchise locations in Towson, Maryland, and Ellicott City, Maryland in 2021. She opened a Kiosk location at the Mall in Columbia (Maryland) in 2023.
Franchises are, “A form of business where a parent company with an existing concept grants or licenses other operators the right to use the company’s trademarks and business strategies in exchange for a fee” (Eater).
Photo courtesy of Tiffany Hoang
One famous example of a franchise is Starbucks. Across all locations, Starbucks has similar menus, signage, and Standard Operating Procedures (S.O.P.s). Gong Cha operates in a similar way. Tiffany explained to us what freedoms she has as a franchisee with Gong Cha:
Franchise Agreements
Franchise agreements typically have provisions governing the following issues:
Trademarks
One of the required items that Tiffany mentioned is the logos, shown below, which she must feature in her store. Logos used by companies such as Gong Cha often are trademarked and are used to represent their brand in providing goods and services. Trademark registration from the USPTO, “Protects the trademark from being registered by others without permission and helps you prevent others from using a trademark that is similar to yours with related goods or services“ (USPTO).
Trade dress
Franchisees commonly have requirements with the franchisor on the layout and certain design aspects of their restaurants. This concept is called Trade Dress. “A registered trade dress can prevent companies from creating and using similar designs. Trade dress registration is based on the applicant's claim that the ’total image’ of its goods or services is distinctive to that company. The main difference between trade dress and trademark is that trademark includes the logo and name, while trade dress covers the image and design” (UpCounsel).
Although she may be limited by trade dress restrictions in her franchise agreement, Tiffany makes it a point to make her business attractive to customers.
Exclusive Territory
Franchisors often grant exclusive territories to franchisees. “The franchise agreement will define the geographic area in which the franchisee is allowed to operate. The size of the territory and the franchisee's exclusivity rights can have a significant impact on profitability and potential growth. Territory provisions will define the extent of a franchisee's territorial rights and any limitations or restrictions” (Entrepreneur). Different brands define exclusive territories differently from one another and often tailor them to each geographic area.
Tiffany explained how the exclusive territory provisions in her franchise agreement with Gong Cha work:
Licenses & Permits
Opening a restaurant requires obtaining many licenses and permits. Tiffany described to us the various permits, licenses, and other legal documents needed to operate her locations, and the challenges of small business ownership.
References
Hatic, Dana. “Franchising a Restaurant, Explained.” Eater, May 8, 2017. https://www.eater.com/2017/5/8/14936008/how-to-franchise-restaurant-mcdonalds-arbys-subway.
“Trade Dress Registration: Everything You Need to Know.” UpCounsel. Accessed December 11, 2023. https://www.upcounsel.com/trade-dress-registration.
“Trademark, Patent, or Copyright.” United States Patent and Trademark Office - An Agency of the Department of Commerce, November 30, 2023. https://www.uspto.gov/trademarks/basics/trademark-patent-copyright.
Zilberman, Clarissa Buch. “The 9 Provisions Every Franchise Agreement Should Have.” Entrepreneur, April 12, 2023. https://www.entrepreneur.com/franchises/the-9-provisions-every-franchise-agreement-should-have/448265.