How to charge licensee for licensing my business? [Archive]

Paul

09-15-2013, 03:47 AM

Hi everyone, I own a small wine bar and have just been approached to license my business. They are looking to use my brand name, recipes and training but I have no idea how to charge them for it. I would appreciate if someone could give me some advice on this.:)

Hi,
Typically in licensing you are paid an upfront fee and an ongoing (monthly or annual) fee.

You must have a particularly well run and popular business with some unique aspects if people want to license it.

Be a little careful about some of the details of the agreement. A well done contract is important.

1) Make sure there is some level of standards they need to comply with. You can’t control their business but you can dictate certain criteria be met to make sure they don’t damage your brand or reputation.
2) Make sure your license is limited to a particular number of locations. Don’t give them carte blanche for multiple units. They may want the rights to license multiple shops. Make sure you are in on it financially.
3) Don’t allow them to sub-license or relicense without your permission.
Find out exactly what their plans are.

There are other details to consider such as insurance and indemnification in case of law suits etc.

As far as pricing it’s obviously negotiable. Upfront and annual licensing fees can be from $ 10,000 to $ 100,000. It depends on the volume of sales, the value of your system and brand, the value of your sources and the extent of training you have to provide.

They may want to just license one shop but if it becomes more complicated than that let me know, I can probably give a little guidance. This is exactly one of the things I have been involved in for years, licensing and franchising of businesses.