Emerging Franchisors’ Guide to Barriers to Entry: Proprietary Methods and Systems (Part I)

An excellent concept is a double-edged sword. On one hand, your unique product or service will gain attention and market share. On the other hand, it will catch the eye of competitors, and copycats will quickly appear and try to profit from your idea.

In order to maintain a competitive edge, new franchisors set up barriers to entry, or conditions that make it difficult for competitors to enter the market. In this series, we’ll examine how emerging brands use barriers to entry to protect their concepts and outpace their competitors.

Proprietary Methods and Systems

Some competitive advantages also serve as barriers to entry. For example, proprietary methods and systems help franchise brands operate more efficiently and outperform competitors, and they also make it challenging for competitors to set up similar systems without infringing on a patent. Without the necessary systems, competitors struggle to successfully enter the market.

These proprietary methods and systems can serve as barriers in two distinct manners. If patentable, they can legally enforce the proprietary nature of the method or system and force competitors to re-think their approach to the market. If not patentable, they can still serve as strong barriers to entry. Some companies have been in business for years and have poured thousands of hours and hundreds of thousands of dollars into their business system. This extended effort may prevent many undercapitalized copycats from entering the market. Only a well-funded competitor with strong experience in the field would dare gamble their money or time in such a situation.

To be considered proprietary, the method or system must be protected under the franchisor’s intellectual property rights. The U.S. Patent and Trademark Office (USPTO) oversees patents for intellectual property.

Two entrepreneurs review their patent application

A franchisor’s proprietary methods could include apps, point-of-sale systems, training material or even the business model itself. Some of these elements are easier to patent than others, however. For example, in order to patent a new business method, it must be:

  • Useful
  • Novel
  • Non-obvious, meaning that another person with training in this field could not easily come up with the same idea
  • Effectively documented and explained so that anyone of the necessary skill level could recreate the idea

There has been much debate over the proprietary nature of business methods. For now, a company can apply for a patent on any business method that produces concrete, useful and tangible results.

Applying for a Patent

The process to obtain a patent for a business method or system involves many steps.

Once you determine that your idea is patentable, the next step is to confirm the uniqueness of your idea by combing through existing patents. The USPTO has a network of libraries across the country called Patent and Trademark Resource Centers. At these libraries, you can conduct advanced patent searches before beginning the lengthy application process.

After you verify that your idea doesn’t infringe on an existing patent, you can fill out the necessary forms and submit an application, which requires a filing fee. Once your application is complete, the USPTO will assign an examiner to review your submission. If the examiner finds that your idea does not meet the requirements for a patent, you will have a chance to rework your application or argue your case. Once your application is approved, your patent will be published and will remain in effect for 20 years, provided that you pay patent maintenance fees.

A registered patent attorney or patent agent can help you expedite the patent process and develop a strong application.

Check back in for the next post in this series, Patents and Trademarks, which will discuss how emerging franchisors can use their unique brands to keep competitors at bay.

Winmark Franchise Partners

For help launching a franchise system with sustained competitive advantage, turn to Winmark Franchise Partners. With 30 years of franchising experience and more than 800 franchise owners representing more than 1,200 locations for five brands, Winmark Franchise Partners can help grow your brand through sound strategy and expert franchising advice. For more information, contact us here or at (844) 452-4600.

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