Licensing question.

GetAGripGetAGrip Posts: 14subscriber
edited June 2007 in Sales
I am wondering if anyone can give the downside to a non-exclusive license agreement.
My company has a nationally known product in which I invented a couple years ago.  We have broad distribution all over the country, however there are several retail giants that will not put in the effort to take on a one product company(which we are).  Due to this problem, I researched several ways to get it into these retailers, one being a license agreement with a company that already takes a product line into these stores.  I have everything set up, all I have to do is sign the agreement and we are in.  This will get me right into Autozone, Advance Auto, and O`reilly. 
The advantages that I see in this is that I have been unsuccessful in getting into these retailers, the free publicity of being in those stores, royalties for not doing anything, and with the quantities that we would be talking about would bring down my manufacturing cost substantially.  What I don`t know is the disadvantages.
This would be a non-exclusive agreement, meaning I can sell everywhere else besides the above mentioned retailers.
Does anyone have any input on the disadvantages of this type of agreement? 
Thanks in advance!

Comments

  • RenewalVenturesRenewalVentures Posts: 0subscriber
    A nonexclusive license has few disadvantages, if you can get a licensee company to accept one. However, you may find that the licensee is not as motivated to distribute your product at a level that you may have envisioned. For that reason, you may consider proposing performance milestones in your license, allowing you to terminate upon insufficient performance.Another disadvantage is that you may have lost out on a "big payday" that comes with an exclusive license. A nonexclusive license may seek to negotiate a somewhat low licensing fee, meaning that you may need to enter into a high volume of licenses in order to capture the value that you have placed on your product.Best wishes in your venture!
  • MichaelBMichaelB Posts: 0subscriber
    If I were faced with this certain type of situation, I would be more apt to put together a private label rather than a licensing agreement.  Unless, I have your information wrong, it seems to me you have your manufacturing and sales together but it comes down that the buyer does not want to invest in just one sku.  In my mind, I would look at a private label.  You still reap the benefits of being accepted into the mass retail sector as well as still making a profit. 
  • GetAGripGetAGrip Posts: 14subscriber
    MichaelB,  Could you elaborate a little more on what a private label is? 
    Thanks in advance.....Trent
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