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For many companies, licensing can expand its brand reach, audience, and ultimately its revenue via royalties. (Take Joes Jeans, which in March announced a $5.5 million footwear licensing deal with Burano L.L.C., as an example.) In the world of fashion, leasing a brand can be a means to move a company, whether small or large, into new ventures without making a major–and often expensive–investment in new manufacturing processes, machinery, or facilities. It can also turn a one-dimensional entity into a lifestyle brand.
Here are four key things to consider before seeking to license your brand:
Is your brand already established in the market? “Licensees want to know where you’ve been sold,” says Judi Seidman, president of InGroup Licensing, a New York-based licensing agency with clients including apparel makers Mudd and True Religion. Â Companies often pick up brands that already have a foothold in the market. Whether it’s at specialty boutiques, your own shop, or large department stores, its attractive to already have a retail base where your designs are available and where a licensee can see has high saleability.
Have you trademarked your brand? “It’s the one way to ensure you have rights to the brand in order to be able to license it,” says Michell L. Davis, partner and head of Atlanta-based Register Lett L.L.P’s intellectual property practice. Trademarks are registered at the United States Patent and Trademark Office (USPTO), and costs can range from several hundred to several thousand dollars. Â You can file on your own or consult with a trademark or intellectual property attorney.
Does your company have a solid business reputation? Seidman says it’s good to have top-notch company management, a good reputation with retailers when it comes to production and availability of your product, proper financing and bookkeeping, and a successful sales force.
Where there’s an upside, there’sÂ a downside. “Fashion history is littered with brands that formed too many license agreements, didn’t pay attention to quality control, and in the end lost prestige, customers, and revenue,” says Susan Scafidi, professor at the Fashion Law Institute at Fordham University Law School. “A smart fashion house needs to think not only about the possibility of profits but also about what each potential license means for the overall image of the brand.”
Key Terms of a Licensing Agreement:
Licensor: Person who holds ownership of the trademarked brand being licensed.
Licensee: Company leasing a brand or brands from the licensee for extension of the brand.
License agreement: Sets terms of license including how the trademarked brand can be used. This is often negotiated with the help of an intellectual property attorney.
Royalties: Fee paid to the licensor. The terms of this can vary, from a percentage being paid per product type or one flat fee or for a certain period of time.
Further Reading: Secure Your Most Valuable Asset: Your Brand
For more on the business of fashion, beauty and style, check for Style Biz each week at BlackEnterprise.com.