21 Sep 2021by tobiasschaller

Furniture Design License Agreement

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If you are willing to present information to potential licensees, make sure you provide written details and film coverage with market research data, competitive analysis, patent status, production cost estimates, and experience reports. You can include all the specifications, drawings and prototypes you have. However, I will focus on the most common approach – only royalties. In this regard, I would like to stress the need to understand the position of the licensee. Being in mass production is hard! There are high start-up costs for basic tools and inventory, increasing pressures from mass traders (such as withdrawing products when they are not sold!), overhead for product development and distribution teams, fierce global competition, changing regulations, expensive and time-consuming certifications, insurance, etc. Young designers often gasp when they hear that a good royalty could be 5% of wholesale costs (about 2% of the retail price) – “but that`s MY idea!” Experienced designers understand that a designed product (not to mention a product that is not developed, purchased, fully developed and tested) is only a small part of the business equation. Good product design is important, but it takes so much more to be a sustainable business success. The issue of risk is at the heart of the numbers. In most cases, designers have very little to lose beyond their time and relatively little development costs. In the business world, return risks earn more. It is important to understand that there is no “standard” contract on sectors or even within a company. Everything is usually negotiable and there are many ways to proceed with compensation. The most common mode is for a company to compensate only with royalties, which helps reduce the risk that the product will not sell well.

It is also possible that the designer will receive pre-financing in addition to royalties, but often this is only a down payment deducted from future royalties. But it`s still fine if you can get it, because there`s no guarantee that there will be future royalties. Therefore, companies usually only agree with subsidies if the amount is relatively small and/or they are confident in selling the product. Insisting on considerable funds in advance is often a quick way to make an agreement more expensive. Hanna Emelie Ernsting: I will definitely consider it. I think with a big piece of furniture like the sofa, it`s different. For some large pieces of furniture, it would be good to put it in stores, because with a sofa you want to sit on it [before ordering it] . . .

Categories: Allgemein