W H AT A R E T H E E X P EC TAT IONS OF

LICENSORS AND LICENSEES?

PETECANALICHIO

EXPECTATIONS OF LICENSORS

1. Licensors expect that the licensee will be committed to investing in the category they

license.

2. Licensees must work hard to understand the essence of the brand

and develop their licensed product in a way that captures that essence.

3. The licensed products should connect with the consumer both functionally and emotionally.

4. The licensor will expect the licensee to start with building the brand into the product first.

5. The licensor will also expect the licensee to be familiar with the contract and to meet the obligations

of the contract.

6. The licensee must ensure all employees in the licensee’s organization working on the license are familiar with its

contractual obligations.

7. Finally, the licensor will expect the licensee to meet or exceed the projected sales targets

for the category as outlined in the contract.

When all of these things happen, the result can truly be award winning products

that meet or exceed annual sales and royalty

projections.

EXPECTATIONS OF LICENSEES

1. Licensees expect that the license they have acquired will provide them with sales growth in the form of growth within existing channels or the opportunity to enter a new channel or new

market.

2. Licensees expect that the brand they are licensing is as strong or stronger than they believe or have been told, that it will open doors and ultimately help them meet or exceed their business objectives.

3. Licensees expect that the licensor or their agents will run a simple, straight forward

licensing program that will not administratively tax their organization.

4. Licensees expect that the licensor will approach the licensing relationship with a win-win attitude that will allow them to move quickly to take advantage of opportunities that present themselves.

5. Because licensing contracts obligate the licensee to sales targets and royalties, the

licensee’s goal will be to quickly achieve sales of licensed product to meet these

requirements.

ROYALTY AND PAYMENT FLOW

Royalty is the monies that are paid to a licensor by the licensee for the right to use the licensed property, calculated by multiplying the Royalty

Rate by the Net Sales.

Below is an example of how the royalty payments would flow from the retailer to the licensee and ultimately to the licensor; the

example assumes a 10% royalty rate.

Retailers such as Sears and Target sell $10 million of licensed product e.g. tee shirts and

caps in a calendar year

The tee shirt and cap licensee sells

$5 million of licensed product to

Sears and Target (based on %100

markup)

The tee shirt and cap licensee pays Disney, the licensor $500, 000 in royal-

ties($5 million x 10%

rate)

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