Brand Licensing: Models and Risks

Three Models: Which One Fits Whom

Lawyers usually describe models through a set of contract clauses. The practical question is different: how much control are you willing to give up and what will you get in return.

The mistake of most companies is choosing an exclusive model for the sake of a nice advance figure, without evaluating whether they are ready to give control of brand reputation to one partner for 3–5 years. A promotional license is safer for testing the hypothesis in this sense, but it does not give the partner motivation to invest in long-term point development — and therefore, ROI is calculated based on different time horizons.

Loss of control: what the licensor actually loses

Formally, the licensor retains ownership of the trademark. In practice, he loses three things at once.

• Customer experience management. The consumer does not distinguish between the brand and a specific point — if the licensee has slacked off, the complaint is directed at the brand as a whole.
• Speed of market response. While the licensor is negotiating with the licensee about changing the product range or prices, competitors have already restructured.
• Asset value when selling or negotiating with investors. A fragmented network of licensees with different quality levels reduces the brand valuation multiplier — investors see not an asset, but a collection of non-obligations.

There is also a purely legal risk that is often forgotten: using the brand for products or services for which the trademark is not registered. A classic example is a license for preparing for the EGE (41 class, MKTU), while the mark is registered only for stationery goods (16 class). The result — a claim for up to 5 million rubles, and this is not a hypothetical risk, but a typical situation from practice.

Quality control: a system, not a one-time check

A functioning control system is built not on trust, but on measurable indicators, fixed in the contract and regularly checked.

1. Set specific standards — for example, defect rate no more than 0,5% of units with visible defects, specifications for raw materials, requirements for packaging and labeling.
2. Include the licensor's right to surprise audits of points and production facilities, not only scheduled checks according to a plan that the licensee knows in advance.
3. Implement mystery shopping and review monitoring as a mandatory KPI for the licensee, not an optional feature.
4. Set penalties for standard violations — fines, license suspension, and in extreme cases, early termination.

The absence of such standards is not an abstract legal risk — it is a direct decline in sales and an increase in complaints that hits the entire network at once, not just one point.

Hidden payments: where to look for the trap

Royalties in the contract may appear transparent — for example, 2,5% of revenue, a minimum guaranteed payment, or a fixed amount. The problem is not with the rate itself, but rather that additional fees often grow around it, which are formally not called royalties.

Most often, they are disguised as 'consulting', 'administrative support', or 'marketing fees' — payments that are not tied to results and do not have a clear list of services. It is not difficult to check them: if the contract contains a clause about a payment without a description of specific work volume, delivery deadlines, and quality criteria — this is a reason to review the terms before signing, not after the first payment.

Territory, timeframes, conditions review

Territorial boundaries should be defined not by administrative units, but by the actual brand influence zone — otherwise it is easy to get a conflict between two licensees operating in neighboring regions with the same audience. It is logical to tie the license term not to calendar dates, but to control points — sales volume, number of opened outlets, achieving KPIs for quality. The mechanism for reviewing the terms is something that is often forgotten to be written down. The market changes faster than a five-year contract: exchange rates, cost of goods, demand. A working solution is to pre-include triggers for royalty or territory review in the contract when certain indicators change, rather than renegotiating the agreement each time through court or long negotiations.

How to choose a model according to business goals and calculate ROI

The Russian market of concessions and licenses today is led by companies with very different strategies. «1C» leads in the number of commercial concession agreements — 523 in 2025 year, the SURF network — 330, and the Moscow-based LLC «Samolot plus» holds first place in subconcessions with 199 agreements for real estate services. These are different scaling models: software licensing operates on a non-exclusive logic with wide coverage, the coffee network — on a franchise model with high control over standards, and the real estate subconcession business — through a multi-level transfer of rights. The choice of model should not be based on what is easier to legally formalize, but on what the brand wants to achieve: rapid territorial coverage, hypothesis testing before a large-scale launch, or full control over the customer experience. ROI of licensing is calculated not only through royalties minus control costs — the cost of reputational risk must also be factored in, as well as how the chosen model will affect the brand's position in 3–5 years, when the contract ends and it will be necessary either to renew or to reclaim management back.