The Brand Licensing Process - Step 4: Perform Due Diligence

1. The Brand Licensing Process Step 4 : Perform Due Diligence PETE CANALICHIO Comprehensive due diligence is conducted from a business, financial, legal and risk management perspective. This will help ensure that the licensee will NOT have unforeseen issues going forward. A Licensee Application is developed to obtain exhaustive information from the licensee. The information would substantiate the secondary research done on the prospective licensee. A Licensee Application should typically include the following: Legal Check Is the company a legitimate legal entity? How long have they been in business? Where are they incorporated? Are they doing business under a different name? What is their structure? Are they a shell corporation or do they have actual employees, assets and liabilities? Have they been the subject of any major lawsuits in the last three to five years? What was the nature of the charges and how did the company resolve them? Financial Check The prospective licensees’ financial statements for at least three years must be obtained. The licensees needs to have the resources to commit to the licensing program. Privately held companies will be reluctant to but this information is critical. A credit check shows timeliness and reliability of the prospective licensee to pay their bills. Business Check Is the company reputable in the selected product category? Do they possess any other brand licenses or have they had them in the past? What are feedback from current or previous licensors on their management of their licensing programs? What is their reputation in the marketplace? What do their current customers have to say about their reliability and service ability? How well managed is the company? How eager are they to get their license? How collaborative do they seem? What are their estimated sales forecasts for the selected product, as well as sales history, over the past three years? Marketing Check What is the prospective licensee’s market share position in the selected product category? How long have they been selling the product? What is their rank by revenue, distribution, employees? Are they a market leader? What channels are they present in? How have they been growing? What kind of product innovations have they launched in the past? What are their strengths? How well do they understand the marketplace and branding? How are they currently promoting their products? Reference Check Licensors should interview at least three buyers from among the retailers of the licensee. The delivery, manufacturing, service, marketing and sales profiles must be known. Licensors should also interview up to three other licensors if there are any. These interviews will reflect effectiveness in executing a licensing program. Quality and compliance Check Does the licensee own their own manufacturing or do they outsource it? How long have they been working with their manufacturers? Will they be able to meet the brand’s quality expectations? How have these manufacturers performed on previous audits? Can they meet the social and environmental compliance standards of the brand? Grab V aluable Resources from Brand Licensing Experts for 100% Free Today Are you interested in extending your brand’s influence, strengthening consumer relationships, and generating unlimited revenue from guaranteed royalty payments? Get Your FREE Membership Today PeteCanalichio.com/fast-track PETE CANALICHIO