Why Do Some Companies Like Gong Cha Change Their Name?

It's often discomforting when companies like Gong Cha change their name, but there are very good business reasons behind it.

You might think it’s a terrible idea for a company like Gong Cha to change their name. They’ve been in business for a few years and developed a cult following in Singapore. To change their name would be a waste of all the marketing and branding they’ve spent on.

Sometimes however, there’s a good reason for businesses to change their name.

Companies Change Their Names More Often Than You Think

It’s an exercise called re-branding. It happens quite often, and sometimes it’s so subtle you don’t notice it. For example, not a lot of people noticed that, back in 2011, Starbucks changed its name. It’s no longer Starbucks Coffee, but Starbucks Corp.

At present, the local Gong Cha (bubble tea makers) is planning to change its name to LiHO starting in June.

But Why?

Gong Cha is a franchise, and the Singaporean owner of the franchise is RTG Holdings. Recently however, the parent company of Gong Cha (called Royal Tea Taiwan) was bought by Gong Cha Korea.

The new owners of the Gong Cha name are imposing new restrictions on franchise owners. We don’t know what these are, but we do know that some companies forbid franchise holders from operating other types of businesses.

For example, if you buy the franchise for a famous chain of pizza restaurants. The parent company of said restaurant may not want you owning other fast food franchises.

Regardless, RTG Holdings seems to be splitting from the Gong Cha franchise and going their own way. As such, they need a new name, and the Hokkien name “Li Ho” is meant to sound more Singaporean.

Some other reasons companies change their names are:

• Name no longer represents the company
• Corporate mergers and acquisitions
• Copyright reasons, or overly generic names
• Negative publicity
• Tax reasons

Name No Longer Represents the Company

Starbucks dropped the “coffee” from its name because it’s no longer just a coffee company. Starbucks long ago started to sell pastries, tea, chocolate, and countless other non-coffee related products.

Another example would be Sony, which up to 1958 was called the Tokyo Telecommunications Engineering Corporation. It wouldn’t have made sense for Sony to retain the name, as by that point it was no longer just operating in Tokyo, nor was it focused on telecommunications anymore.

Sometimes, the company takes on the name of its most famous product. For example, recruitment firm TMP Worldwide changed its name to Monster Worldwide, as they are best known for running the jobs portal Monster.com.

Corporate Mergers and Acquisitions

Sometimes, companies merge or are bought over. This can result in a name change. When AXA became the majority shareholder in National Mutual (a major insurer) in 1999, National Mutual simply took the name of its parent company.

McAfee Associates and Network General merged in 1997, and the new company was called Network Associates International. However, the name changed back to McAfee in around 2004, as the anti-virus software remains their best-known product.

Copyright Reasons or Overly Generic Names

Some names are so generic, they are impossible to copyright. For example, petrol giant Amoco Corp. used to be called Standard Oil Company.

Sometimes, the name is so generic that customers can’t tell if it refers to a specific company, or to an entire industry. United Parcel Service (UPS) for example, used to be called American Messenger Company.

It also causes problems with regard to online marketing. If you call your education company “Singapore Tuition Agency”, you can bet it’ll get lost in a sea of similar terms during a Google search.

Negative Publicity

Some companies change their name because they’ve acquired a bad reputation, and they don’t feel the name is salvageable.

For example, Philip Morris (a tobacco company) caused controversy when it changed its name to Altria - many protested that it was trying to hide tobacco industry involvement in different areas, such as when it donated to political campaigns.

Notably, the name change helped to protect companies like Kraft, of which Philip Mor...oops, Altria, is a major shareholder. (Yes, the same Kraft you find in supermarkets).

Kentucky Fried Chicken changed its official name to KFC not just for convenience; they wanted to avoid mention of the word “fried”.

In Sim Lim Square, many of the blacklisted scam stores repeatedly changed their name, to avoid being identified after their name popped up in the news.

Tax Reasons

We absolutely don’t condone any sort of tax evasion or avoidance. But that being said, some companies repeatedly close down and re-open under a slightly different name, to get tax benefits.

It’s common, in most countries, for new companies to get lower taxes in the first few years of business. This is to give them time to get on their feet (most new businesses run at a loss for the first year). Some small companies decide to “extend” these tax breaks, by repeatedly closing and re-opening with a variant name.

For example, a restaurant named River Valley might close down after two years, and then re-open as New River Valley. Two years later, they close down and re-open as River Valley Restaurant, and then later as River Valley Family Restaurant, and so on. Besides getting tax breaks, this might also qualify the business for repeated grants and lower interest loans.

(Until the authorities notice, and decide to make an example of the owners).

What do you think about Gong Cha rebranding to LiHO? Are you looking forward to it, or would you rather Gong Cha stay the same? Tell us in the comments!

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