This is very attractive for companies that are new to international trade. On the other hand, international licensing is a mode of entry into the foreign market that has certain disadvantages and reasons why companies should not use it, because there is: An example of a licensing agreement in the field of catering would be if a McDonald`s franchisee has a licensing agreement with McDonald`s Corporation that allows him to use the company`s branding and marketing material. And toy manufacturers regularly sign licensing agreements with movie studios, giving them legal authority to produce figurines based on the popular similarities of movie characters. When comparing franchising and licensing, the question often arises as to whether licensing is an alternative to franchising or not. The answer to this question is that no, licensing is not an alternative to franchising. The reason for this is that franchise laws generally define a franchise as a relationship that includes (a) the license of a trademark, (b) some degree of control over business operations (i.e., such as standards and specifications), and (c) the payment of an initial royalty. So if your goal is to expand your business, i.e. a relationship where you have some control and say over what your franchise/licensee partner offers and sells, then the relationship is most likely a franchise. (b) Degree of control – you require your licensee to enter into an agreement that gives you, as a franchisor, some degree of control over your franchisee`s business, i.e., you restrict what they can and cannot sell from their business; and Christian, Glynna K. «Joint Ventures: Understanding licensing issues».
The License Journal. October 2005. Most licensing agreements also address the issue of quality. For example, Licensor may include terms in the Agreement that require Licensee to provide prototypes of the Product, packaging models, and even occasional samples throughout the term of the Agreement. Of course, the best form of quality control is usually obtained before the fact – by carefully checking the reputation of the licensee. Another common quality regulation in licensing agreements concerns the method of disposal of unsold goods. If the items that remain in stock are sold as cheap imitations, it can damage the licensor`s reputation in the market. The licensing agreement gave Starbucks the opportunity to increase brand awareness outside of its North American operations through Nestlé`s distribution channels.
For Nestlé, the company had access to Starbucks products and a strong brand image Brand equityIn marketing, brand equity refers to the value of a brand and is determined by the consumer`s perception of the brand. Brand value can be positive or positive. To use the property of another company, you usually have to pay some kind of royalty. You might be able to pay for this in an initial lump sum or create a plan based on the sale of the property. For example, a license agreement may stipulate that the licensee must pay 1% of all sales to the licensor. If a licensee earns $10 per item, they owe the licensor 10 cents for each item sold. Another common element of licensing agreements includes which party retains control of copyrights, patents or trademarks. Many contracts also include a provision on territorial rights or that manages distribution in different parts of the country or the world. .