How to License a Business Concept

The licensed business idea is the cornerstone beneath the highly successful - and lucrative - concept of franchising. By selling another entrepreneur the ability to make money off of your idea, you get wealthy by helping others do the same. You can license nearly any kind of business product. Some examples include business practices, patented devices, brand names or logos. Although each individual licensed idea will have its own unique wrinkles, the overall process remains the same.

Define, concretely and specifically, what business practice you intend to license. For example, McDonald's doesn't license selling hamburgers; it licenses a system of production and marketing. The more tightly and concretely defined your concept is, the easier it will be to sell - and the easier it will be to enforce against violations.

Write a manual or handbook describing your concept in detail, including how to implement it. You may want to hire a professional writer to complete this step, or a professional editor to review what you have written. Keep the primary manual very basic. Many franchise and license operators make back-end money by selling expansions to or accessories for the original license.

Register the final manual with the US Copyright registry at copyright.gov. This will help prove you invented the idea, and protect you from license infringement. Although all intellectual property is copyrighted the instant you develop it, license agreements are best protected with full and official registration.

Decide how you will license your business idea. Common options include training and consulting services, business operations manuals, business practices and brand names or art.It's a good idea to consult with your lawyer during this step - he will have ideas and know practices that you will not think of.

Choose your method of charging for the license. You can charge an up-front fee, a percentage of revenue, or a combination of both.

Consider the circumstances under which you would rescind the license. Nonpayment is one obvious point, but also include actions that would harm the reputation of your brand as a whole.Again, it's best to involve a lawyer during this step.

Write up the final licensing contracts. As with many other steps, this should be done by a lawyer familiar with licensing and business law.

Tips

  • Current employees are a good source for your first licensing customers. They're already trained and are more likely to be loyal to you personally. Poll your most valued employees about how interested they might be in opening a second location by going into business for themselves.

References

Resources

About the Author

Beverlee Brick began writing professionally in 2009, contributing to various websites. Prior to this, she wrote curriculum and business papers in four different languages. As a martial arts and group fitness instructor, she has taught exercise classes in North America, Europe and Asia. She holds master's degrees in French literature and education.