Defining the Scope of the Licensing Agreement

In this video, I describe how manufacturers who become licensees define the scope of the brand licensing agreement (Step 5 in my 8-Step Process) and define the deal terms (Step 6 of my 8-Step Process) within the Brand Licensing Process. You can view more of my videos on the Brand Licensing Process on my YouTube channel or on my videos page.

Transcript:

Hi, I’m Pete Canalichio, and welcome to the brand licensing pre-launch. You may recall in the first video with Hugh Simpson, he and I discussed the brand licensing guide book. In this second segment, we’re going to talk about step 5 and step 6 of the brand licensing process that we created. In step 5, we talk about what we call, “Defining the Licensing Opportunity.” This is when the manufacturer, who’s the licensee, goes through and thinks about the opportunity to put the brand on their product in the marketplace. So what they decide is what region they’re going to be in, what channels they’re going to be in, and what different stock-keeping units or product categories are going to be in. And so once they’ve done that, then they have to forecast what the growth is going to look like over the first three years. So that information is very important, (1) it’s a bottom-up approach by the manufacturer to ensure they know exactly how they’re going to grow the business with a new brand on it, and (2) it conveys to the brand owner the license or that they actually know what program the manufacturers are intending to do and how big that program is going to be. Now, when they go through this process, the brand licensor is thinking, “Okay, it is important information for us to know the scope of opportunity with this particular manufacturer and help us to think about what the overall minimum guaranteed sales are going to be.” So it’s a very important process step. It’s very important for the manufacturer to know what they can accomplish and for the licensor to know what’s going to be accomplished and how big the program is going to be. So that’s step 5 in the process, and then step 6 in the process is actually negotiating the contract. And that’s when the licensor or the brand owner and the licensee, the manufacturer, get together and define each of the deal terms. And I was talking about a few of those just a minute ago when I talked about the region, the channels, the different stock-keeping units. But in addition to that, other items, other deal terms that are considered include the terms of the agreement, the royalty rate, the minimum sales performance requirements, and so forth and so on. So it’s important for both the manufacturer or brand owner to align themselves and all those deal terms, sign off on those deal terms, and then those deal terms are put into a formal contract. That contract then is developed by each party’s attorney, and it’s actually initiated by the brand owners and then reviewed by the manufacturer’s attorney. And once all that language is agreed, the contract is signed, and the relationship begins. So these are steps 5 and step 6 of the brand licensing process. I look forward to talking to you more on our next video. Thank you.