Commercial law

Licensing

• A product Licence which is an arrangement whereby a distributor acts as an outlet, either wholesale, retail or otherwise for the product of a manufacturer often on terms that give the distributor the exclusive right to sell the product within a specific market. Licences of this nature are common, for example, in retail, motor vehicles and petrol.
• A systems Licence is an arrangement where a Licensor develops a unique method of doing business and permits the Licensee to use its system, in a controlled fashion, in the operation of the Licensee’s independently owned business.  Examples of industries where Licences of this nature are common are fast food outlets, laundries, dry cleaners and motels.  Sometimes the Licensor provides only the trade name and the pattern or formula of the business.  In other cases the Licensee is required to sell goods or services provided by the Licensor.
• A processing or manufacturing Licence is an arrangement whereby the Licensor provides an essential ingredient or know how to a processor or manufacturer.  Licences of this nature are common for example in the soft drink industry.
• A further category is a trademark or brand name Licence whereby the Licensor simply provides a right to a Licensee to use the trademark or business name of the Licensor in association with the sale or manufacture of goods or services.

The reasons for the overall success of 
Licensed
 outlets include:

• The high motivation of the Licensees.
• The high level of consistent quality service in the provision of products and services through Licensed businesses.
• The ability to expand and to penetrate the markets rapidly.
• The increasing image and market awareness of the opening of each new outlet.
• Reduced capital commitment by the Licensor while spreading the risk through the Licence system.
• Proven systems to enable the Licensee’s success from day to day.
• Increased buying power of Licensed system with each new Licensee.
• Minimal management overheads for Licensor.

From the Licensee’s perspective Licensing is deemed to be successful and beneficial for the following reasons:

• Operating at reduced risk of failure.
• Training and start-up support to ease entry into business.
• Ongoing support and services.
• Ongoing product development by Licensors.
• Ongoing financial management and other advice and assistance.
• Improved buyer power.
• Improved marketing presence.

Understanding and effectively navigating the world of licensing often requires expert guidance. A commercial lawyer can provide invaluable insights and legal expertise to both licensors and licensees, ensuring that licensing arrangements are structured and executed to maximise benefits and contribute to the growth and success of the businesses involved.