To License or not to License?

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    I’ve been approached by a manufacturer in the ladies clothing sector who has offered me a licensing deal for permission to produce, merchandise, and fulfil volume orders from the major multiples who want to buy my product and my brand which has a prospective customer database of around 700, and a moderate presence on Facebook and in the target market.

    The culture within the industry is one of good faith operations v cut throat commercial operators that will use hostile payment terms to push new operators into bankruptcy, so they can no longer compete. Contracts in this sector are based on the wording contained on the order/invoice. As a new operator in the industry I’m vulnerable to large sharks with very sharp teeth, and a very small pool of potential production partners.

    Is licensing the best commercial route to market for a new, popular, but small and un-financed retail brand and product, and what are the long term commercial advantages and limitations of this route?

    Have a look at the conversation between me and the prospective licensee below containing the suggested terms of the licensing agreement, can you say how it can be improved? If you can I’ll be eternally grateful. Thanks!

    Hi Ella
    The standard terms for licensed product are 10% of nett sales.
    Nett of vat and discounts.

    I mentioned the brand in general conversation to Scott.
    They will not supply you directly, you need a hosiery partner.

    Hi S,

    What would I do in return for 10%, what would you do in return for the 90%, how long for?

    Hi Ella
    This is your brand commission.

    For our 90% we;
    Buy the product
    Basically everything but marketing.

    Hi S,

    What timeframe would this run to?

    Would you adhere to my RRP of £5?

    How frequently would I be paid?

    If the major multiples do come back with an order, would this arrangement kick into place from the outset, or later on?

    Hi Ella
    As per our conversation.
    Usually a 2/3 year contract.
    Payment quarterly on paid invoices or monthly if large volume.
    Orders from A or B would be included.

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