IHOP versus IHOb
IHOP recently pulled off a major marketing gimmick with their name change to “IHOb.” The change has drawn criticism from many, but it certainly got people talking. As far as marketing is concerned, it would be hard not to consider the change a success. In fact, if IHOP’s sales experience the spike that Wall Street is anticipating, IHOb could be remembered as one of the all-time great marketing moves. As a small business owner, you may be tempted to try a similar tactic with your own business. However, legally speaking, there is a lot more to this publicity stunt than meets the eye.
DBA Registration Issues
In most states, you can’t just change the name of your business without notifying the state. Operating under a fictitious name is generally considered “Doing Business As” (DBA for short) and most states require you to register that DBA. For more on DBAs see our blog article entitled What is a DBA?. Even though the IHOb change is temporary, IHOP probably still had to register the name with certain states. Since IHOP actually changed the signs outside some of their restaurants to IHOb, the company likely had to register the name as a DBA, at least in the states where the signs were changed. Once the DBA is registered with the state, the company can safely do business under the fictitious name in that state. However, doing business under a DBA can be a little tricky. Official documents still need to be executed in the business’s official name. So, the company would have to be careful to ensure that contracts are not executed in the IHOb name. For a large company like IHOP, this is probably not an issue, but for a small business, it can be easy to get caught up in the DBA and make an error that could cost you down the road. You can read more about these issues in a previous blog article, entitled Do You Know Your Own Company Name??!?
Similar Names in Other States
If the company wanted to change the name in every state, the issue would become even more complex. For every state, the company would have to consider the question: “What if there’s already a company called IHOb in that state?” States will not allow more than one company to do business under the same name. Therefore, in the unlikely scenario that the name was already taken, the name change would not be legally permitted in that state. Then the company would have to either a) stop doing business in that state, b) operate under one name in 49 states and a different name in the problem state, or c) find a different name that is universally available. Basically, if the name was unavailable in even one state, it could throw a wrench in the whole renaming process.
Another thing to think about is that even though some states don’t require you to register a DBA, you still may not be in the clear. If you run an LLC and you start presenting your company under a DBA, you could run afoul of the requirements to maintain your limited liability. Specifically, the requirement to put the public on notice of your limited liability status. The last thing you want is to end up exposing yourself to personal liability, all because you tried out a marketing technique.
Trademark Issues
Finally, we need to consider trademark issues. If IHOb was “confusingly similar” to another properly registered trademark at the United States Patent and Trademark Office (or USPTO), then IHOP’s attempted use of IHOb would expose it to a potentially expensive trademark infringement lawsuit. “Confusingly similar” is a complicated topic, and if a pre-existing trademark has a similar (not same) sound, look or meaning (even using a different language), it can become a problem. Read more about this in another blog article, entitled Likelihood of Confusion — Don’t Be Confused by Trademark Law. In IHOP’s case, IHOb is so similar to IHOP that I couldn’t imagine such a switch causing a trademark problem with another trademark out there. However, if IHOP chose to completely change it’s name to something else, say “Robin Rojo” (which is Spanish for “Red Robin”), IHOP could expect a very expensive lawsuit that would be very difficult if not impossible to win.
Keep in mind that we have only briefly discussed some of the issues related to registering to do business in a state, so don’t be too quick to change your company name. Make sure you consult with a competent business lawyer in your state or local jurisdiction.
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Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.
