Licensing

What is it

                                                

                                             
                                                                                             

Licensing is one of the fastest and safest ways for you to find a product to sell, with high margins.

You need to find content providers who you can license from, approach those content providers, and set up your own license deals.

In particular, a license may be issued by authorities to allow an activity that would otherwise be forbidden. It may require paying a fee and/or proving a capability. The requirement may also serve to keep the authorities informed on a type of activity, and to give them the opportunity to set conditions and limitations.



                                                          
                                                      

Brand licensing is a well-established business, both in the area of patents and trademarks. Trademark licensing has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television. Mickey Mouse's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company.

Brand extensions later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent an established brand name for their product.





                                                     



A company may choose to license its brand(s) when they believe there is strong consumer acceptance for brand extensions or products. For example, when Apple launched the iPod there was an immediate need for accessories such as headphones, charging and syncing stations and carrying cases. Apple decided not to manufacture these products and instead chose to have a licensee make the products. By doing so, Apple could offer branded “Earbud Headphones”, “iPod docking stations” and “iPod socks.” Each is made by a separate company but together offer the consumer an elegant solution. All of these accessories are sold by licensees.
Apart from benefits to licensors, there are benefits to licensees as well. Licensees lease the rights to a brand for incorporation into their merchandise, but do not share ownership in it. Having access to major national and global brands, and the logos and trademarks associated with those brands, gives the licensee significant benefits. The most important of these is the marketing power the brand brings to the licensee’s products. When brand managers enter or extend into new product categories via licensing they create an opportunity for a licensee to grow their company. Below is an example of the licensed product process steps:

• Licensor chooses the product categories to be licensed
• Licensor finds and negotiates a license with the best licensees
• Licensees develop concepts, prototypes and final production samples and submit for approval
• Licensor approves licensed products for sale
• Licensees sell licensed products to authorised Affiliates or retailers. 

Licensees expect that the license will provide them with sales growth. This sales growth may be in the form of growth within existing market or the opportunity to enter a new market. To achieve this, licensees expect that the brand they are licensing has significant brand preference, that it will open doors and ultimately help them meet or exceed their business objectives. The licensing contract forces the licensee to achieve certain sales targets and royalties; therefore, the goal of the licensee is to quickly meet their business objectives, thereby achieving their contract obligations. Royalties are the monies paid to a licensor by the licensee for the right to use the licensed property. It is calculated by multiplying the Royalty Rate by the Net Sales.

                                                              

Example for Licensing to sell Name Brand Clothing in the USA.

Step 1

Find the brand-name company owner's address. You need the corporate address so that you can send a written licensing agreement directly to the corporate headquarters. You also need to understand the domiciliary laws that the corporation must comply with. You can find this information by conducting a Dun & Bradstreet search or by contacting a state's secretary of state office. You need to know the company's home location or state of corporate domicile, which you can determine by looking at the company's public filings or initial registration.

Step 2

Search the company's U.S. Securities and Exchange Commission (SEC) public filings. The SEC requires annual disclosures of publicly traded companies. Most brand-name clothing owners have offered their stocks for public purchase. You can use the electronic EDGAR database located on the SEC's website to determine the corporation's net worth and review whether the corporation's trademark is financially viable. Have a certified public accountant review the corporation's earnings statements.

Step 3

Send a request for proposal or request for additional information to the brand-name clothing company that you are interested in selling clothing for. Most large brand-name companies offer information on becoming licensed to sell their clothing brands. Mail your proposal package directly to the corporation or, if the company allows, submit it electronically.

Step 4

Review the company's website. Most companies list additional information on their public websites. A company's additional information may include the initial investment required, no-compete clauses and minimum purchasing requirements.

Step 5

Find an attorney to draft your licensing agreement. Your attorney should have specialized expertise in dealing with contract issues, business ownership issues and intellectual property rights. Many companies also use standard licensing agreements prepared by corporate counsel. If this is the case, you need your own attorney to review the written licensing agreement. You may want to add language or tailor it to your specific situation.

Step 6

Comply with the federal registration requirements required by the Federal Trade Commission in registering your apparel.

                                                

Generally the licensees will benefit from the use of licensing related promotions by driving more customers to its product or service.

The premium companies will benefit because they will supply larger volumes of items.

The licensors will derive an income from the use of their brand and the increased exposure it will bring, hopefully encouraging other areas of its business to also expand.

The service or main product using the licensed brand in its promotion benefits by providing its target market with a favourable item and/or association that drives purchase.

Licensing is a billion-dollar retail market worldwide. But a license isn't a prescription for instant success. It gives you the borrowed interest of a name that is either unique or has some consumer acceptance, but it still takes good selling and marketing to succeed. A license is, in essence, a tool, and when used well, it's an extremely cost-effective marketing tool.

Licensing offers three major advantages. First, it may mean you have something unique your competitors don't. Second, it may mean getting a little better margin because it's unique. And third, it may mean that 10 percent of the retailers you call on that you've never been able to sell to will finally take a look because you have something different. And when that happens, you can sell the rest of your line.


                                                                 

                                                           

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References: Jill Stimson, Entrepreneur.com,