Licensee vs Licensor

Defined:
li·cen·see [lahy-suhn-see] - noun
a person, company, etc., to whom a license is granted or issued.

li·cen·sor [lī'səns-or] - noun
a person or company who grants official or legal permission to do or own a specified thing. See Synonyms at permission.

I had to be clear on these before I even ventured to the Licensing Show. Sure you know what they are but what are they REALLY? In terms of intellectual property or tangible things?

Well I went to the show thinking I was a licensee because my brand isn't well known enough to garner much attention. Certainly not the kind that some slightly larger companies were getting.


The show inspired me to go into licensing and scrap the whole manufacturing thing. But that's another blog post.

Some of the booths were so cool. They looked like little stores.


So it turns out that I was right (kind of) in thinking I'm the licensee because my brand does not have much equity yet. But I would only be a licensee if I was there to, say enter an agreement with an artist so I could put their designs on my line of kids clothes. I would be licensing their art in hopes that people would like it enough to buy it, thus selling my product because of their art. I make money, they make money.

But in another case, because I am a brand owner I would be a licensor. Say Stylease had brand equity and someone wanted to capitalize on the Stylease brand being connencted with mom-invented, problem-solving, well-made products. They would license the logo from me for their products and I would make a royalty on the sales of those products. People bought their products because of the Stylease brand. I make money, they make money.

But not just anyone is granted a license. If you have hardly any distribution and you want the Coca-Cola logo (for example) so you can get broader sales channels (grant me the logo and the sales will come) well, it doesn't work like that.

Coke wants to grant their logo to big companies with wide reach so they can get their name all over the place.

There are apparently no hard rules in licensing. Loose guidelines yes but with all the billions of dollars being made in the licensing industry, there is no such thing as a "Standard Licensing Agreement" every facet of every line of every thought or idea is negotiable.

This is a great thing. but also extremely dangerous if you don't know what you are doing. You would have to hire a consultant and licensing atty. to protect you from pitfalls like a single sentence in a wordy contract that negates a line somewhere else

>POOF< they don't owe you any royalties - didn't you understand line 58 b.1 section 7.

As intimidating as it was with the big guns signing HUGE agreements and renewing successful past deals, what struck me was the incredible energy everyone had. No one was moping around like at the apparel shows where I exhibit. People in licensing are very happy people.

And why shouldn't they be? Here is company A being approached by company B so everyone can make lots of money. And they do. A good licensing partnership is like the best marriage in the world.

Customers want to buy the brands they believe in and trust. Brand owners want to offer products in as many categories as are appropriate for their brand perception. It's a win win.

Next time I will discuss good and bad match-ups between brands and categories. Why some work and some don't.

Licensing Show Journey

So as you may know, I attended the mother of all Licensing shows in NY in June.

It came about in the strangest way. I had been receiving literature about the show for 2 years or so and I always wanted to go but it wasn't a priority. And as you busy people know, things that are not in the top 5 on the list... well, they just don't happen.

So I was going to be flying back to MI with the girls around the time of the Licensing Show so I wrote this year off too (as far as not being able to go) because Rob was staying here, no one to watch the kids, plus we would have JUST returned to MI the timing wasn't right blah blah blah.

Well the same little slap in the face came to me as did when I started this thing. I was digging through old e-mail, found an important contact from last year, and reconnected with him about two weeks before the show. He wanted to meet and asked if I was going to be in NY. I e-mailed my sister-in-law, "Can you watch the girls?" Yes she'd love to. Went to Orbitz, bought my plane tickets. Went to the Licensing Show website and registered, then signed up for the whole conference package since I had no idea what the hell I was doing, kissed my hubby goodbye and left for Michigan. Got briefly settled in then took the girls to their cousin's house and left for New York!

So the moral is: Sometimes the only one getting in your way is you.

Next will come all the stuff I leaned at the show!

Good questions

I had a nice fellow contact me and ask me some start-up questions. I am happy to report that he has gone into production on his line and he is on his way with a fabulous product that you will no doubt see on shelves soon. I am including parts of his reply because I think they bring up some good points. Most of what you read, doing research, is corporate positioned facts and statistics. One reason I started this blog is to let you all in on my actual experiences I encountered starting a soft goods company and trying to launch an apparel brand.

Statistics are interesting and important but I found that when I was doing my research I was not really absorbing the information because it was all so new, I didn't have any reference in place to apply it. I look back now on what I read in the books I bought at the beginning and think, "Wow, that's right! That is true." But at the time it didn't make much sense I was just filling the mental library with information.

I hope you enjoy the following exchange:
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Question:
I’m just now uncurling from the fetal position after realizing how little I know... I’ve been doing a lot of research and a lot of what you covered I’ve never heard before. If only you had more time I could totally see a book from you, that breaks down how to launch a product, based on different budgets.

Awesome tip about who manufactures the product. I would have never phrased it like that.

Did you set the amount you were going to spend at the beginning and have a large upfront cost that maintained you for awhile, or did you have to spend and spend and spend?
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My reply:
To answer your question regarding money... I did not do a business plan. (But I have one now) Blessing and a mistake.
A blessing because had I planned more, I would not have started the business because I would have had some indication of the colossal undertaking involved in trying to launch an apparel brand.

A mistake because had I planned more I would have had some indication as to how expensive it would be.

The problem with investing "in the beginning" is that the beginning could take 5 years. I have invested about $400,000 so far. Investors, 2nd home mortgage, separate business loans etc... Your trade shows and advertising budget annually should be about $20,000+. It is imperative that you advertise consistently. The best venue for juvenile items is Earnshaw's. It's a phenomenal, very focused infant/toddler children's wear trade mag. I pick up 1-4 new accounts a month just from my ad in that magazine. So that's about $700-$2,000 a month in ad rates depending on the size of the ad you run. Travel and hotels for tradeshows run about $1,500 per show plus $3000 in booth fees x 2-4 shows a year. You might surmise from this, that a 10-15K initial investment is nowhere near enough to sustain even the first year. And you can't count on that nice $250,000+ order from Sears in the first couple years. You might get it, great! But what if you don't? Do you have the cash flow to keep moving forward?

If you have a gift item you should REALLY invest in fantastic packaging design because if the concept is great, fabulous packaging would put you over the top. Consider consulting a MERCHANDISING specialist. Marketing and publicity is great but someone who can help you with merchandising will be key. You will also have to deal with high insurance premiums and textile testing because you are in the juvenile market. It's pretty strict in flammability requirements and you are dealing with the highest liability bracket so insurance will need it's own budget consideration.

Even if you do get a big order right out of the gate, you will need to use asset-based lending to manufacture it because you won't see a dime from big stores until 3-6 months AFTER you SHIP the order. Try not to use a Factor. Their rates are not competitive. Celebrate your first big order but should they cancel while the order is on the way to the floor (which they do, because the wind changed direction or the PMSing buyer never wrote the order down and says she never made one with you. I'm not kidding) Then you have lots of inventory and you will have to pay for it somehow.

Start small. Boutiques prepay with credit cards mostly (get set up to take credit cards if you don't already) But be prepared to be in the mom and pop market for a while. If you can open enough accounts, the cash flow is much better and MUCH less hassle than big accounts.

Consider contacting big brands like Gerber or Carters to see if they want to license the patent (if you have one to license) so they can put their name on it and your manufacturing and distribution problems are solved.

If you plan to launch your own brand, be prepared to commit a couple hundred thousand $$ for the long haul.

And know that in the United States, in this economy it is extremely difficult to get a big box store to give you that vendor number and the real estate (rack space) on the floor and get behind the product so that you will see the sell through you need to get a re-order. So far, I have found it impossible. That isn't to say it can't be done, but unless you have an in, all I can do is wish you the best of luck. And should you succeed you must come back and tell me how you did it! :-)

OTHER LINKS:

Consider advertising on JamesGirone.com It's also a great place to find reps and a ton of other info for the juvenile soft goods industry.

Find a good, honest contractor (manufacturer). They will source fabric for you and trim and print up your hang tags, garment tags, order your custom painted snaps... EVERYTHING. One-stop-shop. They will even handle all the packaging. And work in US dollars only if your contractor is overseas.

Just for clarification: YOU are the manufacturer of your product. Even when you hire a "manufacturer" they are actually your sewing contractor. People will ask you, "Who manufactures your product?" The answer is, "We do. It's our product, we design and manufacture it." Unless of course you license the patent to Gerber... that's a different story.

My warehouse and fulfillment company is:
E Fulfillment Service. Great rates, incredible customer service, safe, clean, dry warehouse with virtually zero error and theft rate. They are so so SO good.

On a smaller scale to help with pattern development right here in the US of A... try
Pattern Design Unlimited I have never worked with them but am constantly intrigued by the services they offer...

Contact SCORE if you want for free business advice... investor stuff and you name it. My SCORE consultant is one of my most important allies. And over the years I have worked with him, we have become good friends.

One of these days I will get into the details of licensing. What a great industry THAT is!!!

Moving again

No apologies this time. I'm packing up half a house and kids and pets and business stuff to head back to California. And have been for a few weeks. It has been a nice but short summer. I can't help but think next summer will be more fun and less do-dad and odds and ends. There was so much to do this summer and so little time. And really no help. It was fun having Rob here for two weeks but I could REALLY use him this week!

The girls and I go back on Tuesday. I have so much I want to tell you!!! A follow-up on all the amazing stuff I learned at the Licensing show, a few topics that I read in the paper made me want to run to you and bloggity blog about it but I even forget what the topics were. It was important to remember at the time, but there they go... Whooosh!

But just since this rental property bathroom took up 3 solid weeks in July, and impacted my summer a bit...here it is:

This is what it looked like when we got a hold of the place. Broken tub and toilet wall in the middle of the tiny room, paneling... it was a nightmare. Someone call the fashion police.


So we ripped it out and put in this one


It was nice but the shower had leaking issues that ruined the floor and walls so I tore it out and decided to go the tile route...


So now we should not have to deal with it ever again. Plus, the claw foot tub is very stylish I think.