I was managing a well know and growing franchise company in Dallas, Texas. We were busy, averaging a new franchise candidate visit to the headquarters weekly. Sorting out leads, supporting openings, training, finding and approving real estate sites, signage, sales tracking, royalties, supply chain issues …oh my!
The last thing that crossed my mind at the time was a proprietary information/trademark infringement issue. We had a two-man partnership team who came to visit with us and were eventually approved as franchisees. It is sometimes a long road between initial inquiry to awarding a franchise; 2, 3 or even 6 months. These two guys wanted to do a unit in our original area, so we were struggling with the location description.
We worked with these gentlemen for months introducing them to our systems, real estate profiles, etc. We were finally in agreement and set up a time for the franchise signing. For the first and only time in my franchise career, I had a candidate(s) that far in the process totally “ghost” us. No return phone calls, no return emails, nothing. We finally chalked it up as a late in the process loss when we found out they opened a “copied” concept 2 miles from out original store. They were developing the unit while extracting all the information they could from us!
Of course, the new store was called something else and the color scheme was changed. They also changed the interior seating a bit but seeing the unit was eerie. The counter was identical to our units, the kitchen layout was identical to our units, the equipment was the same and the menu was incredibly similar. They “stole” our concept and were competing with us. What do we do? We called our trademark attorney and discussed the situation. We asked our attorney to investigate the store and he did. We were certain we had these guys dead to rights!
Well, after multiple billable legal hours and expenses, the decision was made to let it go since it would be difficult to prove that the unit was “confusingly similar” to our unit in the mind of consumers. Additionally, since they had not signed our agreements yet, there was no written agreement of non-disclosure or non-compete. It still stuck in our throat however as we felt a little used and betrayed. We eventually beat them up with good old-fashioned business competition.
Lesson for Franchisors: Don’t ever get that deep with a candidate without signing something.
Lesson for the Attorney: Hire a private investigator to gather the evidence (pictures, etc.) and save your client some cash!!! (Standard theme of all my blogs!) Lesson for potential Franchisees: Go with the program but if you don’t, be original.