Ok, Heres the situation...
I have a design that encompasses several niche markets. we have the first design prototyped, market identified, a 1 year track history of sales, a sufficient manufacturing operation and a self sustaining marketing program, (customer representatives) the second design prototyped, market identified and ready to get advertised.
this one design with slight modifications will encompasses approximently 4500 + markets. and, it will also have 6 different products for each category.
The product can be marketed world wide and sales prices ranging from $1,000 to $7500.00 the average retail sale probably falling in the $3,000 range.
Through a trusted individual we painted a snap shot of the concept and told him we were looking for someone to take this design and concept to the next step... he put us in touch with his trusted guy who has since contacted us and we have discussed a licensing arrangement, kicked some numbers around and he looks to be a serious candidate for us. we are going to meet in a couple of weeks to discuss the details of the contract and from what i can tell, everything seems to be going in it's proper order.
THis will be a big undertaking for him and his business will be almost completely tied to my design.
he has access to getting my product in retail stores world wide and a team in place to handle retail sales...basically, everything we need. and he is enthusastiac, and sees great potential, is young and energetic but still has 25 years experience behind him in the b usiness..
the things I have asked for hs has agreed to..
the product retains our name
25% (not yet broken down) royalty will be paid... (i'm thinking 15% of the gross sales price and 10% of the profits is reasonable.
the royalty is paid for all products regardless of who designs them, or any variations to my designs,... basically, anything that is sold in the niche markets we are entering...
I get a monthly accounting
everything is done by contract
ithe license is transferable but the terms of the royalties or profit % are not.
the downside is, he can't pay us an advance on the royalties as what $ he has is going to have to go into everything that needs to be done... (development costs are very high) so, i understand not wanting to pay an advance..
but, I am wanting a minimum yearly guarantee of sales and wondering if their is some formula of figuring out what that minimum should be..? SHould it be based on my yearly sales (afterall, it's an exclusive agreement which would prohibit us from making them ourselves) or a multiple of yearly sales?
my sales are growing more every month with a minimal effort or cost so how woud i figure out potential sales and value a minimum for him? we have orders going into next year already but... they are not completed sales until they are completed.
also, when we license a product, is it usually the product is one % and the use of the name another or, is it all the same, product and name.
is their anything i need to know about letting another company use our name?
also, in the licencing contract, should it be kept specifically to "royalties" and product design (we get the final say on all new designs)? or, it is a time to add responsibilities that don't pertain to the product like exposing my marketing efforts? any extra training etc..?
and finally, does 25 % sound about right for something like this?? when we meet, his sticking point is mainly going to be me getting a % of the "profit"... but i cal already see how that could be too subjective for me to be comfortable with. so, I am going to hold at 15-10.
and finally, are their any special provisions i should be making sure are included..??
this is a big thing, or potentially big... by my calculation, even a poor representation and a mild failure would be more $ than i could earn in 10 lifetimes... I've been working and struggling for 10 years getting this single ddesign and concept to this point and i don't want to blow it now by not thinking of everything but... i can't think of it if i don't know it?
Eventually, i am going to have to see a lawyer (he is going to be the one initiating the contracts, so i'm waiting before i talk to a lawyer... but before i do, i am hoping the experts at SUN can enlighten me.