Reader Mail #13: Business Names, Multi-Level Marketing and Franchise Businesses

Posted by Fitz Villafuerte under Business, Reader Mail on March 18, 2010

It’s time for another Reader Mail, an ongoing series where I answer your personal finance, business and investing questions which was sent through my email.

For today, we’ll talk about business names, multi-level marketing and franchise businesses.

I’m sharing these because I know, some of you might have the same questions in your mind and I hope that you’ll find my answers helpful.

Also, do note that the senders have been made anonymous to protect their privacy and details of the letter may have been edited for purposes of clarity and brevity.

Hi. I’d like to ask some questions about starting a business if its okay with you.

What’s the difference between a business name and a trade name? Is my store name a business name or a trade name? Or is my company a business name and the store name a trade name?

If the DTI registers sole proprietorships only, then do I still register my store name with them as a business name even if the business is a partnership?

Moreover, if I register my business as a partnership with the SEC, and want a different name for the actual store, where do I register the store name and how?

For example, if the partnership name in SEC is Raining Cats and Dogs Company and we would like to name our store Cool Cats Petshop – where to register the store name?

Also, if I want to make my own brand of cat food – do I need to register the brand or can I just print out my labels?

Hi. A business name is the legal name of your business. The name that is written in your permits and legal documents. A trade name is the “brand” of your business.

For example:
Golden Arches Incorporated = business name – registered with SEC
McDonald’s = trade name – registered with Intellectual Property Office

Your store name can either be your business name or your trade name. It doesn’t really matter what you use. Legally, what’s important is that you have a registered business name.

So let’s say you registered the business name: “My Food Business Merchandise” – then that’s what will be written in all your legal documents.

Now, can you put up a store that says “Cat Food Haven”? YES! This is perfectly okay. You can name your store whatever you want. However, of course you don’t want someone else to put up a store that says, “Cat Food Haven”.

Since “Cat Food Haven” is not your registered business name, others can use that as their store name UNLESS you apply for it as a trade name. When you own the trademark of “Cat Food Haven”, then no one else can use it – or even register it as a business name.

The same goes for the brand of your cat food and all the other brands of your products. It’s not legally required but if you want exclusivity of use, you have to register the brand name / trade name to the Intellectual Property Office.

And it goes without saying, if someone else has already registered a particular brand name / trade name with the IPO, then you cannot use it anymore. And this rule also applies to the logos of your business, not just the name.

Additional Reading:

Hi, I just have a question on Multi Level Network Marketing. My wife and I are currently working in Manila and have some investments in mutual funds and hopefully entering real estate next year.

Fortunately, as we are having our vacation in General Santos City, Mindanao, my wife’s friend introduced a Multilevel Marketing business for a “Multivitamin Company”.

My question is how do I gauge whether the multi level company is still focused on product and consumer profit rather than investor profit?

My wife’s friend explained a very few about the product which is very good but a lot of time it explained about making profit out of investors. I also want to ask a formula to actually calculate profitability from both products and investors. Thanks!

Hi. I know, most MLM companies recruit members by focusing on the “potential profit” rather than the “profitability of their products”. For starters, you can read this article I wrote about MLM: The Basics of Multi-Level Marketing

Next, I suggest you compute your break even sales and see if it’s attainable. How? I suggest you do this sample calculation:

Joining / Investment fee: P15,000

Assuming a binary structure (wherein a pair from both sides of your “tree” will earn you commission) then a pair will earn you P3,000

This means that to break even with the investment, you’d need to recruit 10 people as your downline. (5 pairs) This is the worst case scenario and assumes all your downlines will not be able to recruit anyone.

So now, ask yourself – do you know at least 10 people whom you will be able to convince to join? If so, then maybe joining is a good idea. If not, then better not join and “invest” in the company. Hope this helps.

Hi. I’m a bank manager presently contemplating of retiring.

I’m in my mid 40’s and starting to realize that entrepreneurship would be the next stage of my career. I’m thinking of franchising. Any thoughts and ideas about this? Thank you very much!

Hi. Franchising is always an option if you don’t have the time to develop your own business from the ground up. It will cost more to acquire a franchise but you’ll be up and running within weeks.

If you don’t have enough capital, you can perhaps just start the business on your own. To give you an example:

A food cart business would cost around P150,000 to franchise plus business registration fees and other expenses. However, putting up your own food cart business would cost you around P80,000 total.

Now that may seem to be the best choice financially but you have to consider that franchising has the advantage of brand recall and a business support system.

Anyway, those figures are based on a study by a friend who wanted to put up a Hong Kong style noodle food cart business. Currently, my friend has not yet decided which to take and is still in the process of checking out other types of businesses.

But as always, someone who wants to become an entrepreneur should always consider going into a business that you love. And if you want a long-term venture, then try to avoid going for fad businesses.

Learn more: Buying A Franchise Business: How To Know If You’re Ready

And that’s our Reader Mail for today. I hope you were able to learn something new today from it.

Also, please note that my answers are solely based on my business knowledge and personal experiences. Thus, I welcome any correction, suggestion and additional information from you regarding the matters discussed above.

Lastly, I invite you to please become a member of the Ready To Be Rich community by subscribing to my blog. Thank you!

Photo credit: Pete Zarria



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3 Responses to “Reader Mail #13: Business Names, Multi-Level Marketing and Franchise Businesses”

  1. Philippines Business Consulting says:

    I think franchising is a great way to make investment when not being to certain of a business. The Philippines franchise model broke the mold when it showed how the market here responds to franchises. I would also agree in researching to start your own franchise but having one in place is very easy.

  2. Camila Perry says:

    i have tried selling different products from Multi Level Marketing and i can earn a decent amount of money from them.`,.

  3. Alex Atwood says:

    I’ve been taking a multivitamin for years since I became very anemic and had to be hospitalized. I was in my 20s at the time. It is never to early or late to start trying to take better care of your body. Taking the right vitamins is part of that approach.

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