Brand Architecture series – Part 5: The impact of legal and regulatory considerations
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Brand architecture is one part logic and one part logistics.
Logic is what drives the design of the architecture itself. Across your portfolio, what structure or arrangement works best for your business, your employees, and, most importantly, your customers? For example, if your enterprise has an overwhelming number of offerings, it could be advantageous to streamline and simplify by combining similar products or finding better ways to organize and present the offerings. But if you instead need to heavily market a specific product, creating a new sub-brand may be more beneficial. And if you’re shifting from a product-based model to a solutions-driven one, the right move may be to completely change up the way you present your brands and products. First and foremost, brand architecture is an application of reason and rationality—of logic. Ultimately, the question at its core is: “What framework makes the most sense?”
But it’s not just an exercise in logic; there are also logistics to consider. Brand architecture can’t be built in a vacuum—because even if something seems like it would make sense on paper, it still may not be feasible in practice. And some of the biggest logistical hurdles to brand architecture are the legal and regulatory parameters you’ll need to navigate when making changes.
That’s why one of the most important steps in the brand architecture journey is to consult with your legal team. Because while adopting a new or updated brand architecture might feel like an obvious choice, there are likely to be legal considerations lurking down the line that could make a new strategy too cost-prohibitive or even unimplementable. That being said, a conversation with your lawyers early on can make the process smoother later—helping you find workarounds to what may have initially felt like roadblocks. Below, we’ve outlined a few legal categories that may pose challenges to brand architecture, so you can cover your bases with your regulatory experts before diving in.
Contract Restrictions
Acquiring a brand means potentially inheriting a whole host of restrictions about how, when, and where it can be used, depending on the fine print of the contract. For example, sometimes an M&A transaction may include conditions about when a name change can occur—especially if the current name has strong existing equity or is the name of a founder (e.g., the name can only be changed after one year of legal ownership). These types of stipulations can impact brand architecture.
Similarly, in cases where businesses are supported by donors (e.g., the higher education or medical fields, etc.), this funding may also come with strings attached. If a private university wants to standardize the naming of its various schools, for instance, but one of the schools is named after a donor, it may be trickier to change the overarching brand architecture—especially if there are naming conditions as part of the donation. In general, if donor or sponsorship dollars are a critical aspect to your business, you need to make sure you are considering how your architecture impacts this area. These types of contractual considerations are important to review before moving ahead with a new approach to brand architecture.
Geographic Restrictions (National and Foreign Considerations)
Service area agreements determine where a brand is legally allowed to operate—and these geographic limitations can have ramifications on brand architecture. This is particularly true in industries such as insurance, retail, and hospitality. Many cities or states, for example, may place restrictions on the number of hotels that can operate in a given location—either to avoid over-commercialization, or to preserve competition and prevent monopolies. Sometimes only one or two of same hotel brand are permitted within a certain radius.
To get around these types of rules, many hospitality firms build multiple brands that live as separate entities within their brand architecture. . It would be rare to find three Marriott hotels back-to-back on one beachfront stretch. But you may find a Marriott, a Sheraton, a Westin, and a Renaissance all on the same block. All of these are Marriott-owned brands, and its house of brands brand architecture approach was undoubtedly designed with these geographic legal restrictions in mind.
Beyond geographic limitations in the US, global brands should also consider foreign regulations—particularly in areas like the Middle East or China, which often have strict restrictions on what brands can operate within their borders. In these places, reorganizing brand architecture—a decision which may necessitate the renaming of a parent or sub-brand—may actually threaten a business’s ability to operate there.
Furthermore, existing copyrights and trademarks can influence naming—and, as a result, brand architecture. Introducing a product to a country whose name is already trademarked there will force a name change—which can add extra complications to brand architecture. Think about dual names like “Axe” (global) and “Lynx” (its name in the UK, Ireland, Australia, New Zealand, and China). In Unilever’s nearly endless house of brands, “Lynx” adds yet another branch, which to some consumers, may feel cumbersome or confusing. In any naming process (which is a key component of brand architecture), conducting trademark searches across geographies can help brands get in front of these situations. This is a great example of how legal restrictions can become a challenge to solve for (i.e., creating a new brand for specific markets) but do not necessarily stop an overall strategy.
Entity Restrictions
In addition to geography, it’s essential to assess all the types of entities within a specific portfolio. Understanding the parameters around existing entities can help business leaders prepare for how these may eventually coexist with other entities that are established or acquired in the future.
For example, non-profit and for-profit entities often require a level of separation and must live under distinct umbrellas. If a for-profit organization wants to open a non-profit arm (e.g., a research institute or a philanthropy-focused foundation), this will inevitably impact the overall brand architecture for the business. Some entities may also have different tax codes that prohibit them from being too closely associated with others. Keeping these entity-based limitations in mind is critical before outlining out a new brand architecture blueprint.
Regulatory Filings
When establishing sub-brands, creating new products, or changing an offering’s name within brand architecture, companies may have to execute regulatory filings, depending on what their industry requires. This is par the course in the healthcare and medical device industry, where regulatory filings help maintain quality control for products that are technically new to market.
Regulatory filings can be positive or detrimental. On one hand, when a brand architecture-driven change triggers a refiling for an existing product, it can be a costly, time-consuming, and disruptive procedure for the company. Some older products also may not be able to meet current regulatory requirements and would have to be reimagined thanks to a name change. In these instances, it’s important to understand the tradeoffs of any architectural or nomenclature changes that would prompt refiling.
In other circumstances, however, creating a new name for the latest iteration of a product (even if it’s just the next version), can actually enable a business to market a marginal innovation as the “next big thing” (instead of as the “original product, 2.0”). A new name would require a regulatory refiling but, in these instances, may be worth it for a company’s go-to-market strategy.
While this list of legal considerations isn’t comprehensive, it does offer a snapshot of the types of regulatory watchouts that need to be factored into the brand architecture building process. These legal challenges are in no way dealbreakers for creating a new brand architecture—legal and regulatory restrictions should not dictate your architecture strategy—but they are important scenarios to talk through with your legal team before charting a course forward.
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