What are the pros and cons of either approach and what should a brand owner know before making the decision?
How does it work when the brand is popular in more than one country and local sub agents are also required?
All brand owners fear loss of control, especially if they have never previously experienced the disciplines and safeguards of a well-run licensing programme managed by experts.
Therefore, most instinctively want to manage licensing in-house at first. However, that means higher risk, cost and time to recruit staff, before the revenue potential of the brand when licensed is known.
The lower risk option is to give one or more current senior management employees responsibility for licensing and appoint a master licensing agent to report to them and to manage the licensing programme.
The candidates for master licensing agency will all want the territory defined in their representation agreement to be 'The World', or at least all of those countries where the brand is currently popular with consumers.
Some such agencies will have offices in a few other countries and appoint sub agents in the rest. Other such agencies will be based in one country and have a network of sub agents in other countries, with which they have previously run other brands’ licensing programmes.
Once appointed, it is the master licensing agent’s primarily responsibility to manage the licensing programme globally and to maximise the returns to the brand owner.
Those returns are a balance of Profit, Promotion and Protection:
- Profit meaning royalty revenue,
- Promotion meaning increased exposure for the brand to consumers in new categories,
- Protection meaning both enhanced brand image and also trade mark protection, through use of the brand in more classes of goods.
The master licensing agent ensures that all of the necessary business functions are provided for the brand owner: sales, marketing, contracts, royalty collection and product approvals.
Those functions are managed by the master agent, with necessary local resources provided by each sub agent.
In each country, local retailers have preferred local suppliers. Therefore, local effort to licence the brand is necessary, in order to maximise returns.
The master licensing agent shares its royalty commission with each sub agent, country by country. So, the brand owner does not need to devote extra resources to working with sub agents.
All proposed licensee agreements and all resultant product designs are subject to the brand owner’s approval and the master licensing agent is the conduit for all of that, whether on its own deals or on those of the sub agents.
If a licensee agreement includes multiple countries within the defined territory, the master licensing agent and each sub agent affected have pre-arranged agreements about sharing royalty commission for sales in their country.
Brand owners are likely to ask why they should give so much responsibility to a master licensing agent and why they should not simply appoint different licensing agents in different countries.
That would necessitate either hiring one or more expert licensing people in-house or creating a chaos of fragmentation, inconsistency and duplication for the licensing programme across the world.
For brand owners beginning new licensing programmes, the lowest risk/ highest return option is to appoint, trust and support a good master licensing agent to build their licensing programmes.