It's no secret that the value chain in brand licensing is one of the most intricate among all industries. Such complexity is a result of the involvement of and interaction between multiple parties in the licensing journey. Of all the involved stakeholders, however, it's licensors and licensees that bear the greatest number of responsibilities and are involved in the largest number of processes. With the licensing lifespan averaging at 18 months, cooperation between these two parties is critical to the success of licensing programs. For many brand owners, the process of onboarding new licensees is a period of intense work. As the whole outcome of licensing venture is put at stake, brands often dread this procedure. Solution to this challenge is in the balance between planning, transparent communication, and control. In this article, we're listing exact steps for relieving the process of onboarding new licensees into licensing projects.
The first step in a successful licensor-licensee collaboration is setting the scopes of licensing workflow and determining clauses of a formal agreement. This process usually starts with due diligence during which parties implement research on each others’ businesses. Doing this helps licensing partners to decide the terms of the contract. Once these terms are discussed and accepted during the next session, the partners sign an agreement. The clauses may vary depending on the parties’ expectations of the licensing program. Typically, they include the matters of exclusivity, compensation, sub-licensing opportunities, quality control provisions, representations, and warranties.
Licensors shouldn't forget that the real name of the game in partnering with all licensing stakeholders, and especially licensees, is trust. The terms of licensing agreements might change upon the shift of needs of one or both parties. On the contrary, grows exponentially with the risks that partners take.
Once licensing partners agree on the legal matters, it’s time for their teams to get to know each other as well as every intermediary in the licensing chain.
In this stage, teams start discussing how the selected properties are to be extended into the licensee's products. The mission of brand's team is to showcase the brand’s style guide, product quality standards, operational workflows, release dates and promotional schedules. Many brands go as far as to presenting the brand's business plan if they see that it would help the licensee team’s to better understanding the brand.
Clarifying brand's timeline and expectations and introducing internal systems and tools are another practices that make cooperation with licensees simpler. Forward-thinking brand owners verify that their new partners have everything they need in advance to speed up product development.
It's likewise a smart move for brands to arrange frequent meetings with their licensees early in the collaboration. As people who know their brand best, they recognize it's only through effective collaboration with the licensee's teams that they can achieve licensing profitability.
Some brand owners, once they see the first sign of product development progress underway, disregard the need of administering their licensing partner early enough. Therefore, they are unpleasantly surprised with early failure of licensing programs that such inaction entails. The primary challenge is the control maintenance. Ideally, licensors should start implementing it already at the beginning of licensing program. However, brands but often ignore this need.
Maintaining control over a licensing program starts with basic administrative duties. These duties include tracking the summaries of the license agreements, monthly reports, invoices and reminders, and producing various reports.
Licensors must maintain the production quality control and monitor licensee’s actions to eliminate possible hazard coming from their side. One such risk is licensee opportunism, which implies violation the terms of agreements (like using substandard materials or distribution channels).
Foreseeing gaps in the licensing execution should be the number one concern of the management team. This is especially essential if the cooperation with a licensee has a long-term character. It’s essential that the degree of trust between the two parties is high. Still, brands should always stand for their own interests and protect their equity from the possible hazard.
Complying with the common sense principles above might seem like the mission impossible at first. Yet, doing saves brand teams time, nerves, and cash in the process of onboarding new licensees. It takes great effort to build trustworthy and viable relationships with licensees. And while trust should be the basis of these partnerships, brands should bear in mind that in licensing they are only as strong in as their licensing partner.