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What Ashley Teaches Us About Licensing and Partnering (Part 2)
Licensing continues to be a significant strategy for both furniture manufacturers and retailers. Furniture Today reported earlier this month that more than a dozen licensed groups were showcased at market.
In a previous post we reviewed general licensing principles using the first half of the Ashley licensing agreement between Ashley and Jennifer Convertibles as a model (for further background, please read the previous post). Since than Jennifer Convertibles announced that it was opening a second Ashley store under the agreement, so I guess the licensing model is working for them.
I received many comments and questions regarding this topic from our loyal readers, so let’s pick up where we left off and finish reviewing the second half of the Ashley agreement. Please click here to see a copy of the Ashley agreement and my comments. As always, let me know your thoughts by posting a note below or emailing me at jcohen@homefurnishingslaw.com.
As a quick plug, Leslie Carothers, a fellow FT blogger, is helping to organize this year’s Education Conference to be held Aug. 12-14th in Charlotte, NC for WITHIT-Women In The Home Industries Today.
I’ll be speaking on “What You Need to Know to Set Up a Win-Win Licensing Partnership.” There are many fine speakers and an opportunity to network, so please consider attending.
Undetermined commented:
In February 2008, Lisa/New Designer posted several questions regarding my first post and discussion on licensing. Lisa raised a question regarding royalties for furniture design licensing arrangements: before agreeing to a royalty, usually the licensee will build a financial model which considers numerous factors including the market, desired rate on investment, channels of distribution, any required minimum royalty payments, the degree to which the design is protected by patent or otherwise, etc. We've seen royalties range from 2.5% to 10% but most commonly between 3% and 8%. Lisa also asks about what "initial sum" a designer should ask for pointing out that she has invested about $300,000 in R&D. It's not unusual for a licensee to pay an advance against royalties. However, the licensee will focus on projected net sales and the financial model we discussed rather than licensor's investment. Lastly, Lisa asks for deal points to propose "before getting into crunching out the contract." At the "Term Sheet" stage, the parties should focus on the business points rather than the legal aspects, for example: the royalty rate (including any guaranteed minimums); the term of the license and any renewals (licensee may want a longer term to recoup upfront costs but also depending on its right to terminate); territory; nature of the license (exclusive, semi, or non-exclusive), etc. Legal terms to agree upon later will include indemnification, maintenance of the patents, consequences of termination, potential non-compete, and many many more. If you have a question, feel free to post a note or email me at jcohen@homefurnishingslaw.com.
Undetermined commented:
Thank you for the Withit plug and we look forward to your session at our conference. S Lyke, Executive Director
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