Helping You Understand the Aspects of a Buying Group
Be prepared to discuss the advantages of being a GPO member because most of your potential members may be unfamiliar with a buying group. You also need to establish your organization’s objectives, assets, and activities.
Your alliance will always include the following benefits:
- Bargaining power to lower the cost of merchandise
- Streamlined ordering of goods through a more efficient process with the vendors
- Better response time from the suppliers since members become high-volume purchasers
- Increase in effectiveness by offering goods with competitive prices while still earning the profit needed for success
- Advice or guidance in marketing, employing, and more
- Collective strength for marketing, branding, and advertising under one brand name
Start by putting together a list of suppliers that your group will need. This record will help boost the appeal of your group to potential members.
Consider other vendors that provide the various needs of your business, such as payroll, insurance, postage, marketing, IT, collection, and answering services. When it comes to inventory, include sellers that offer wholesale items to give you options for carrying more product lines at lower prices.
It is normal for members to pay an administration or membership due to join the group. Make sure that the cost is low enough that it is more than offset by the savings they will get on their purchases. Set the fee as low as possible to make partnerships attractive.
The dues you collect will be used for staffing, office expenses, and even warehousing of goods. You will likely need to rent a small and affordable office space for the staff to work out of, so factor in that cost as well.
There will be some positions you can outsource, such as an attorney who specializes in navigating the legal complexities of buying groups. Your organization will need to hire dedicated people to carry out various duties such as ordering, coordinating shipping, and keeping the financial accounts of members to be billed for specific services and goods.
One of the most important roles is a chief executive officer. You want someone that is both an industry expert and well-respected by vendors and potential members. While it can be tempting to utilize a member for the CEO position, this can be a major mistake. Most business owners are too busy running their companies to devote time to manage the day-to-day operations of the co-op.
Once you have conquered the initial hurdles, start looking for members to set your plans in motion. Find like-minded people that will understand and appreciate the benefits you offer. You want your participants to be people that respect their fellow entrepreneurs and won’t see them as competition. They also need to be considerate and willing to do their part to maintain healthy relationships with the vendors the group chooses.
Buying groups come with a lot of legal hurdles. From the initial formation of the alliance to day-to-day activities like members joining or leaving, you need to be meticulous to ensure you are addressing everyone’s legal needs.
Buying group laws are different from traditional business regulations, so work with an attorney who specializes in co-ops.
Among the most valuable assets of a business are marks used to identify either its services (service marks) or its goods (trademarks). They are an integral part of the company going concern value.
To realize the value of a trademark, consider the fact that a bottle of water with a prestigious brand name sells for more than a generic container of water. Independent retailers are also willing to give up six to eight percent of their gross revenues for the privilege of brand name identity that franchisors offer.
Our team once received an email inquiry from a client, asking if it’s true that registering the name of his business on the internet is cheaper than getting a trademark registration. In response, we said that it is true, but it is a classic example of getting what you pay for.
Domain Name Registration
Domain name registration on the internet protects only the exact letters that have been registered. So if one simply varies or adds one letter to a phrase, a new domain name can be registered with no questions asked. Even more importantly, registration of a domain name does not, in and of itself, offer any protection beyond setting aside that particular clause as a domain name on the internet for the registrant.
For instance, we own the domain name BuyingGroups.com. We use that web page to provide legal information concerning purchasing alliances. The mere fact that we have a domain name registered would not protect us against another law firm that advertises itself as the “Buying Groups Law Firm.” If we did not have BuyingGroups.org registered, that law firm could register it as a domain name.
To protect the name of your alliance, choose the correct title. Your company needs to select an attractive name that would help market its services. It must also be a handle that does not infringe upon the rights of others.
First Step: Conduct a Trademark Search
At a minimum, the records of the U.S. Patent and Trademark Office should be scanned. Anyone can conduct a federal trademark search online through http://www.uspto.gov/web/menu/tm.html.
It is vital for the company to have a search done in each state where he intends to do business under that name. Generally, state trademark records are also accessible by the internet through the Office of the Secretary of State. There is no charge for online federal trademark and state searches.
If no conflicting registrations are found after the searches, it would be a good investment to have a trademark lawyer perform a probe on the mark under consideration. The level and the cost of the inquest will depend on the extent of the mark’s use. Various factors go into considering whether the proposed logo conflicts with existing registrations or pending applications which require the expert judgment of a skilled lawyer.
How Trademark Search Protects You
It is very important to have the search done before either a state or federal registration is undertaken. Your company could be better off using an unsearched mark without registration than to register an unsearched mark.
Some registered owners maintain monitoring services to alert them of all new applications and registrations for federal, state, and even domain names. If an application for an unsearched mark comes anywhere near the scope of protection offered by a monitoring service, it may trigger a cease and desist letter from a lawyer.
Second Step: Register Your Mark
The next step is to protect the selected trademark through registration. If you are only going to use the service mark within one state, then registration with the Secretary of State is all that is needed. You need to consider a federal registration if you plan to use your mark in several states.
Using Word Mark
One way to register a service mark is to put it on record as a word mark. This means that just the words, without any accompanying design or logo, would be registered. Those words will be protected, regardless of any changes in the logo the owner may make from time to time.
Using a Stylized Logo
Another way of registering the service mark would be to include the stylized logo. A design mark registration would prevent a competitor from changing the words of the mark but using the same type of logo. If the logo is a key part of the service mark, then both types of registrations are recommended.
Protect Your Brand
Common law acknowledges that marks have rights of protection, even if they are never registered. The priority of a mark is based upon first use. Common law security extends only to the geographic area where the mark is used. Federal registration of a trademark offers nationwide cover even if it is utilized in only three or four states.
Third Step: Monitor Your Mark
The next step in protecting a service mark is to preclude others from using or registering marks that could be similar. You can do this through a monitoring service or by repeating the search process from time to time to see if there have been any new registrations filed at either the federal or state level. If others are allowed to use identical marks for similar services, the logo becomes so weak that it is no longer protectable.
Last Step: Follow the Law
The final step is complying with the additional filing deadlines required by law. A Statement of Use must be filed on a federal registration between the fifth and sixth-anniversary date of registration to avoid cancellation.
Renewal papers must be filed between the ninth and tenth-anniversary dates to avoid expiration dates. State registrations generally require renewals every five or ten years. These deadlines must be followed, and because they are so far off, it is easy to lose track of them.
Operating a Buying Group
Having a viable purchasing program requires skillful efforts on two fronts, almost simultaneously. The first front is with the members of the group. Simply put, the group will need to get them rowing in the same direction to effectively negotiate with its vendors, the second front. For a purchasing program to be effective as to any given product line, several key elements must be present. These include the following:
- There are at least two or three strong competitors offering a comparable product.
- The product line offered by each of these competitors must be of high quality and is reasonably interchangeable with those offered by the other competitors.
- The vendor must be able to service the entire group with a high rate of shipping performance.
- The vendor must be willing to sell to all of the members of the group upon the same terms and conditions.
- The members must have the ability and willingness to drop one vendor’s line and go with the line of another vendor in order to support the group’s program.
If a group cannot put most, if not all, of these elements together as to any given product line, the program will have a difficult time succeeding.
Get Help From Professionals
No matter which direction you want to go to when you are getting ready to leave, you will have a lot of legal hurdles to overcome. Count on our experienced attorneys who specialize in working with buying groups and understand the intricate needs you have. We have been helping people in your situation since 1985 and are happy to help you navigate these complexities.