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Things to Consider Before Licensing Your Brand

Business News Daily Editor
Business News Daily Editor

Make sure to answer these questions before licensing your brand.

  • Licensing a brand is an important part of protecting your hard work.
  • Licensing is one of the only ways to give your brand legal protection.
  • Brand licensing can give your brand direction.

No matter how long your company has been around, licensing is a great way to extend your brand into new businesses without making the capital investment and time commitment needed to move into manufacturing and sourcing new product lines on your own. 

What is brand licensing?

Licensing is the process of renting or leasing something intangible, like an idea. It helps to create and manage contracts between the person who came up with the idea and the people who want to use that concept. Licensing helps to protect an idea that might be ripped off or used by someone else without the permission of the person who owns or created the idea. This is an essential step for ensuring that other people do not get the credit and proceeds resulting from your hard work and effort. Licensing allows the creator to make money off of an idea with their own merchandise and by licensing out or loaning out the right to use that idea to other companies.

Before you embark on a licensing venture, consider the following:

Make sure you own it. Be absolutely sure that you own all the rights to the brands and trademarks you're looking to license out. Is your brand protected in all of the countries in which you expect your product to be marketed and for all potential merchandise categories? Any licensing agreement will include a statement warranting that you own the rights, so be sure that you have all your legal ducks in a row.

Know your brand, and create an appropriate strategy. What does your brand stand for? The answer might be less obvious than you think. For example, Jeep is a brand of vehicles, but the licensing program has been built around ruggedness, the outdoors lifestyle and ecological consciousness. Jeep was able to carry those brand equities into categories such as consumer electronics, apparel and even baby strollers. So think broadly about what your brand does and can mean.

Define your goals. There are lots of reasons to license your brand. You might be looking to get into a new merchandise or service segment without the cost of building a new business internally. Perhaps you're trying to move your brand into a new distribution chain. Are you primarily trying to support your core business by exposing the brand to a wider audience? (Remember, a display of licensed Budweiser beer steins on a shelf in Walmart might bring in relatively little revenue to the parent company, but it's great exposure to a lot of potential beer drinkers.) You might be aiming to protect your brand from being usurped in a particular country or merchandise category. Establish your hierarchy of goals, and it will help you create your strategy.

Be disciplined about the companies you work with. As in the rest of your business, be disciplined about the companies you do business with and the product categories you authorize. Does the licensee you're considering have the right kind of distribution? Can they make the appropriate quality and quantity of the product? Can they meet your timeline? If you don't have the right match, don't do the deal just to get into the category.

Understand the competitive landscape. Who and what else is vying for the product categories that you think your brand should be in? Why would a potential licensee choose to license your brand as opposed to a competitive one? Why would a retailer carry a product with your logo or character on it rather than somebody else's? The first step toward figuring out the answers to those questions is to "invest some shoe leather" –in other words, go to stores and analyze what's already on the shelves you'll be vying for.

These are steps to help you prepare for a successful licensing venture. It's a great business model that requires a strategic mindset and a disciplined business approach.

How much does it cost to license a brand?

With the help of a good licensing lawyer or trademark lawyer, you can learn what type of licensing you need and what will work best for you and your brand. With an idea or new product, it is always best to first trademark, then figure out how much you want to license the rights to that idea for. You are going to be in charge of setting the price for using your idea, you are going to negotiate the royalties, the required product quality and even the exclusivity of your idea.

What is an example of brand licensing?

A great example of a brand license could be a character that is synonymous with the brand, like Mickey Mouse. This character is licensed and can be used legally only by those who hold the license. If you have that license, you can use the character. The character can be used to sell various products by the company that licensed its use. This type of licensing is fairly common. You might also see brand names or logos that are licensed and that can be used only by that company to sell things. With big-name brands that have recognizable characters or ideas associated with them, it is this association that sells the product.

Image Credit: Pinkypills / Getty Images
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