As of October 1, 2017, Starbucks Corporation (SBUX) retrenched its brand by shutting down its online products store in order to drive customers to the company’s coffee shops instead. This type of brick-and-mortar focus by some retailers and wholesalers creates online licensing opportunities for entrepreneurs looking to rapidly grow their startups using others’ brands.
Getting Started With Online Licensing
If your startup is technically savvy and is proficient in direct response Internet marketing, research brands that complement your business model but lack a viable online presence. Rank these brands on what they can potentially do for your startup. Factors to consider include the expected return on your investment (ROI) of time, energy, and money.
Approach the owners of the top brands on your ranked list and express an interest in licensing their brand for the sale of products and/or services online.
Of course, not every brand owner will be interested in doing a deal. However, there will be some willing to discuss online licensing.
Putting Together The Online Licensing Deal
Among the business contracts and other legal documents that will paper the deal is the license between the brand owner as licensor and your startup as licensee.
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Three important issues to address are:
- Initial term and any renewal options;
- Royalty payments; and
- Scope of license (including any limitations and exclusions).
Plan For The Future In Your Current License
Smart licensees leave themselves an option to continue working in the same market as the brand owner after termination of the license. For example, you may want to form an online licensing deal with the brand owner’s competitor or even start your own competing brand for products and/or services to sell.
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If you want to have this option, the legal documents for the initial licensing deal must leave open the door for you to do so. For example, if the deal with the brand owner includes a covenant not to compete with the brand owner online for a period of two years after the license terminates, that will significantly impede your ability to license a competing brand or start your own.
Of course, if your startup’s investment in the original deal can be readily transferred to a product or service that does not compete with your licensor, having the option to compete post license termination becomes less important.
Need help putting together an online licensing agreement? Set up a telephone consultation with Internet Business Lawyer Mike Young today.