Restaurant Business, March 1, 2005

Fightin' Words

By Michael Malone

With a goal of 15,000 units across North America, Starbucks would seem to have set its sights on every other street corner across the continent. But Masset, British Columbia, probably hasn't made the list--at least not yet. Picturesque as it may be, Masset isn't exactly a site scout's idea of paradise: It's a beautiful but rugged patch of ground with a population that barely tops 1,200. It's also on an island. The Canadian mainland is a ferry ride away--a six-hour ferry ride. So much for casual tourist traffic.

But while there might be no Starbucks on Masset, there is a HaidaBucks--a full-service luncheonette opened six years ago by three members of the indigenous Haida Nation. Young males in the Haida culture are known as bucks, says partner Darin Swanson, so the boyhood friends--who once played on a basketball team called the Haida Bucks--decided on calling the operation HaidaBucks Coffee House.

Which is where all the trouble began.

Starbucks was displeased to learn of a competitor with both "Bucks" and "Coffee" in the name. In the spring of 2003, Swanson, who figures HaidaBucks does around $200,000 a year, says he received a letter from Seattle advising him that he had two weeks to change the name and take his web site offline. When he refused, his little island received some rare visitors willing to take the seemingly endless ferry ride: a team of lawyers from Starbucks.

Nearly two years later, Swanson remains confounded by the legal aggression; in his mind, HaidaBucks and Starbucks have little in common. "We serve coffee, but we serve roasted duck too," he says. Swanson adds that the two concepts are not exactly fighting each other for customer dollars. "To get to the nearest Starbucks, it's a 90-minute drive, then a 6-8 hour ferry ride," he says, "then another 9-hour drive." Swanson says he and Starbucks (which refused numerous requests for comment for this story) ironed things out with a compromise: He dropped "Coffee" from his sign. And since everybody in town knows that HaidaBucks sells coffee, Swanson seems no worse for the wear.

A happy ending for him, but not so for many others. In an age of relentless expansion and cutthroat competition, a restaurant's name has become more sacred than ever before. And at a time when any successful chain is bound to suffer an imitator who tries to duplicate everything from his menu to his tablecloths--often just across the street--the industry seems to have come to a point where a restaurant's name (the words, how they look on a sign, and even how they just sound) has become the distillation of its brand.

So far, so good--except for the operator who happens to pick a name that rings a bit too familiar, or sounds just a hair too close to that of an established player. Increasingly he, like Swanson, can expect a fight. Legal dueling over names isn't just more frequent, it's nastier, experts say, owing to factors like the internet, which can spread a restaurant's name farther than any neon sign used to. What's more, even unintended or farfetched encroachments on a name amount to no defense, as many have found.

Starbucks, by no means alone in its pursuit of alleged name stealers, gives just a taste of how clearly the battle lines have been drawn. Its legal department has lately gone after a cafeteria called Sambuck's, and even a coffee shop in Portsmouth, NH, called the Den. It's not that Den sounds like Starbucks, but that it serves a strong blend it calls "Mr. Charbucks." Den management thought the name was funny. The folks in Seattle did not.

The issue of trademark infringement in the restaurant industry is not a new one. In the early days when chains were first establishing themselves, McDonald 's dueled with a California vegetarian restaurant called McDharma's, and BurgerKing was prohibited from doing business within range of a mom-and-pop--also called Burger King--that had opened in that market first. Since opening in the 1920s, White Castle has fought competitors with names like White Tower, White Clock, and White Palace. But the battle over names seems to be heating up nowadays. Tiny burger chain Cheeseburger in Paradise--named in homage to the Jimmy Buffett song--was forced to drop the "in Paradise" portion of its name (which is, in effect, the whole name) after the singer inked a deal with Outback to develop a new concept named after the same song. Gourmet burger chain Fuddruckers has been duking it out with a competitor called Fudpuckers, whose name the operators say is a euphemism used by local fishermen for a fish that's too small to keep, and hard to get off the hook. Fudpuckers founders say they knew nothing of the burger chain upon opening in 1982.

What's more, the fights aren't always limited to deep-pocketed chains going after mom-and-pop imitators. Outback's casual seafood concept Bonefish was hit with a lawsuit by a Florida indie called Fishbones. Viewers of reality program "The Restaurant" saw chef and partner Rocco DiSpirito served with papers at his eponymous restaurant from another Rocco's, that one a longstanding New York bakery. (The demise of DiSpirito's operation took care of that snafu.)

Theories abound as to why these cases are multiplying. Some point to the rise of celebrity chefs, whose very names are their empires and hence worth defending. Some blame the internet, which has made it virtually impossible for a restaurant to lie low in some corner of the country, its name known only to the locals.

Others believe the root of the trend is the relentless pace of national chain expansion. "As more and more chains bump into local restaurants [with similar names], it really complicates the trademark situation," says Glenn Gundersen, one of the nation's preeminent trademark lawyers. "It used to be, lots of different restaurants could coexist without ever coming into conflict with eachother."

No more. "You fight hard to build your brand, and then someone comes along and tries to capitalize on it," complains marketing director Mike McNeil of Hooters, whose company recently lost a legal battle with 14-unit Ker's WingHouse. ("WingHouse" doesn't sound much like "Hooters," but the signs--not to mention servers' short-shorts--look similar, which was close enough for legal action.)

Jeff Sinelli, who grabbed the Which Wich name for his new sandwich concept after a foodservice manufacturer let its ownership of the trademark lapse, says there's an imperative nowadays to fight imitators and protect the brand. "You owe it to your investors and shareholders to protect their assets," he says. "You can go broke going after them, but if you don't, it dilutes your brand." And going broke is, not surprisingly, quite a motivator. In the quest to keep competitors from knocking off their names, companies find themselves investing heavily in both added staff and technology. Chains pay for costly trademark searches and retain clipping services--small armies of archivists who comb through newspapers and magazines in search of the offending names. Maintaining intellectual property attorneys doesn't come cheap, either.

Starbucks wouldn't furnish a figure for how much its legal campaign against Sambuck's has cost, but Sambuck's proprietor Samantha (nickname Sam) Lundberg (maiden name Buck) is sure Starbucks has spent big bucks on the name fight. The Den's proprietor Jim Clark estimates the coffee giant has dropped $250,000 ($3-$5 for each of the $60,000 he's spent) to force him to yank his Charbucks brew off the shelf. "There's nobody like Starbucks when it comes to trademark
issues," Clark says. "They're ridiculously stubborn."

Fear of protracted legal battles could be part of the reason why some chains have elected to ignore some copycats--at least ones that don't seem to pose territorial threats. Execs at frozen-treats chain Tasti D-Lite have seen concepts with similar offerings and names, such as Heavenly Delight, pop up, yet they say they'll let the quality of their product do the brand differentiating. "[The other concepts will] probably go away on their own if the product's not as good," says marketing director Gertrude Bakel. "And it's free advertising for us if their name makes people think of our brand."

Jamie Richardson, marketing director at White Castle, echoes the sentiment that rivals who rip off names--but not the quality--will likely fall prey to simple market forces, and it's cheaper in the longer run to just let them die. "It's easy to borrow from the name," he explains, "but it's harder to deliver value. If [the copycats] don't meet customers' expectations, they'll be rejected."

Of course, many companies have learned that engaging in trademark litigation can cost them in other ways. Hauling mom and pop into court can have disastrous PR consequences, as some have learned. And sometimes the publicity stemming from a David-and-Goliath battle benefits the allegedly guilty party.

Take the response of one visitor to the Sambuck's web site: "I applaud Sam for standing up against this big insecure bully, and realize that most small businesses lose these kinds of battles because the legal costs forced upon small businesses by million dollar bullies is so enormous, that they have to give up." Bernie Shapiro, owner of Dharma's (formerly McDharma's, and then We Are Not
McDharma's), says the publicity of fighting the Golden Arches has been a boost for business.

Meanwhile, back in the island of Masset, Swanson says HaidaBucks has enjoyed considerable exposure in light of national news outlets picking up the story of his fight with Starbucks. And Swanson's defense that his store was far away from any Starbucks has blossomed into pure irony: Now he's got the money to build, and has set his sights on the mainland. "I'm not gonna lie," he says. "The publicity has been huge. That's why we're expanding."