Aug 4, 2010
Tip of the Week: Evaluation of Prospective Licensee, By Andrew Richmond
During initial negotiations between a licensor and prospective licensee, a licensor will want to know as much as possible about the prospective licensee. A licensor should perform research to determine whether the licensee is the right fit for representing the licensor’s property, taking into consideration the following factors:
Financials: If the company is publicly traded, the licensor should review reliable, third party finance websites, which will have detailed information on the company. If the company is privately held, the licensor will need to purchase a third-party prepared report (e.g., Dun & Bradstreet report), which includes collected data detailing a company’s credit-worthiness and financial stability. These types of financial data provide the licensor with needed nuts-and-bolts information vital in assessing whether the prospective licensee has the financial ability to succeed with the license opportunity.
Referrals and Recommendations: The licensor should contact other licensors who previously worked with the company to get their assessment of a prospective licensee’s adherence to license agreement provisions, quality and timeliness of work, sales efforts and achievements, payment history, availability for discussions, etc.
Samples: The licensor should require prospective licensees to send samples of past work.
In-person Assessment: The licensor should request a visit to a prospective licensee’s corporate offices, factories, warehouses, etc. This look into the prospective licensee’s business provides the licensor with the opportunity to engage in face-to-face conversations and observe the company’s business operations. Nothing impresses more than a well-run, professional operation.
“Tip of the Week,” is written by attorney Andrew Richmond, president of the Richmond Management Group, Inc. (RMG). Andy has more than 15 years of business and legal affairs experience with such companies as Fox, Hallmark, Jakks Pacific, and Sony. Currently, as president of RMG, Andy provides his clients with business and legal affairs representation, with a focus on licensing, promotions, marketing, and related matters. Andy can be reached at andy@richmondmanagement.com.
