Licensing your not-for-profit\u2019s name to a for-profit company can provide a valuable new revenue source \u2014 but it can also be risky. If you\u2019re considering a licensing arrangement, ensure that the partnership really will generate funds and, possibly more important, a positive impression of your brand.<\/p>\n
Success . . . and controversy<\/strong><\/p>\n When licensing arrangements work, both charities and companies can experience significant benefits. AARP and UnitedHealthcare, the ASPCA and Crum & Forster Pet Insurance Group, and Share Our Strength and American Express have all successfully executed profitable licensing arrangements.<\/p>\n But such arrangements can also cause controversy. In the 1990s, the Arthritis Foundation licensed its name to a line of Johnson & Johnson analgesics called Arthritis Foundation Pain Relievers in return for at least $1 million per year. But many groups complained that the arrangement compromised the charity\u2019s objectivity.<\/p>\n Preventing unwelcome surprises<\/strong><\/p>\n To ensure a license arrangement doesn\u2019t become a public relations problem, thoroughly research any potential partner\u2019s business and products and the backgrounds of its principals. Also confirm that your mission and values align. If you determine that a potential licensee\u2019s products or services have the potential to undermine your brand, take a pass \u2014 no matter how high the promised royalties.<\/p>\n Work with your attorney to include certain provisions in any license agreement. Specify how the licensee can use your name and brand, mandate quality control standards and detail termination rights. And realize that signing the agreement doesn\u2019t end your responsibility \u2014 you\u2019ll need to actively monitor the licensee\u2019s use of your name and intellectual property throughout the agreement period. If it sounds like all this will require additional staff time, you\u2019re right.<\/p>\n In fact, the resource-intensive nature of licensing leads some nonprofits to outsource the work. Outsourcing allows your organization to focus on its mission, but you\u2019ll probably pay upfront fees, a monthly retainer and a percentage of the royalties your consultant secures. So it\u2019s important to crunch the numbers and make sure your license arrangement is worth this expense and effort.<\/p>\n