Reviewing a character or brand licence for merchandise

A merchandise licence lets a manufacturer or retailer put a character, a film, a game or a brand on products for a period, in return for a minimum guarantee and royalties. The licence sets approvals at every stage, a minimum guarantee payable whether or not the product sells, and a term that may end before the stock is sold. I review the licence from the licensee's side and return it marked up with a written explanation of the changes and which ones a licensor will accept, for a fixed fee of £495 in three working days.

Who this is for

Manufacturers, importers, retailers and online sellers in England and Wales taking a licence to make or sell toys, apparel, homewares, stationery, food or gifts featuring a licensed character, entertainment property, sports club or fashion brand, and want the licence to be one they can perform and make money under. Both parties are businesses; product safety law protects the consumers who buy the merchandise.

What to look for in a merchandise licence

The property, the products and the channels

The licence should define the property (the character, artwork, logos and names), the licensed products by category and description, the territory, the channels (mass market, specialist, online, the licensee's own stores) and the term. The review checks that the rights cover copyright in the artwork under section 92 of the Copyright, Designs and Patents Act 1988 and the registered marks under section 28 of the Trade Marks Act 1994, that the licensor warrants it owns or controls them, and that the licensee's products are not carved out by a category the licensor has licensed to someone else.

Approvals, the style guide and lead times

Licensors approve concepts, artwork, pre-production samples and final products, with the right to reject at each stage, and the licensee cannot sell until the final sample is approved. The review asks for the style guide to be delivered on signature, for response times at each approval stage with deemed approval or an escalation if the licensor is silent, for approval not to be withheld for reasons unrelated to the property, and for the licensor's approval to be conclusive so that a product approved cannot be recalled for a style objection later.

Minimum guarantee, royalties and the sales that count

The minimum guarantee is paid in instalments regardless of sales and recouped from royalties; the royalty is a percentage of net sales, with the licensor limiting the deductions. The review checks the payment schedule against the licensee's cash flow and the approval lead times, asks for the minimum to be recoupable across the whole term rather than year by year, for net sales to exclude returns, VAT and agreed discounts, for royalties on sales to the licensee's own group to be on arm's length prices, and for the audit clause to be limited to two years' records with the licensee paying the audit cost only for a material underpayment. The Late Payment of Commercial Debts (Interest) Act 1998 applies to sums due either way.

Product safety and who is the producer

The licensee is the producer or importer of the merchandise and carries the safety obligations: for toys, the Toys (Safety) Regulations 2011; for other products, the General Product Safety Regulations 2005; and strict liability for defective products under Part I of the Consumer Protection Act 1987. The licensor will require the licensee to comply with those, to test products, to carry product liability insurance naming the licensor and to indemnify it. The review checks that the indemnity is limited to the licensee's products, that the licensor bears responsibility for the artwork and property it supplies, and that a recall required because of the licensor's own property is at the licensor's cost.

Territory, online sales and competition law

Merchandise licences restrict sales by territory and channel. Under the Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 a restriction on active sales into a territory reserved to another licensee can be exempt, but a ban on passive sales or on all online sales is not, and a term fixing the licensee's resale prices breaches section 2 of the Competition Act 1998. The review checks the online sales clause, the marketplace restrictions and any recommended retail price wording against those rules.

Term, sell-off and what happens to the stock

The licence ends on a date, and the stock made against a season's forecast does not. The review asks for a sell-off period after expiry for approved products at normal prices, for the licensor's obligation to buy remaining stock or allow its sale where the licensor terminates without cause or fails to renew, for the licensee to be able to complete orders accepted before expiry, and for the licensor's right to terminate to be limited to unremedied breach, non-payment, insolvency and change of control, with a cure period for quality and approval failures.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Complex review, £895. Heavily negotiated or unusually complex documents. Five working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The minimum guarantee is more than we expect to earn in royalties. Should we sign?

Only if the number reflects the products, territory and term you are being granted, because the minimum is paid whether or not the products sell. The review asks for the minimum to be recoupable across the whole term, staged to the approval lead times, and reduced where the licensor withdraws products or territory.

The licensor takes months to approve samples. Can we do anything?

Only through the contract. The review asks for response periods at each approval stage, for deemed approval or escalation where the licensor is silent, and for the minimum guarantee instalments to be deferred where approval delays prevent the licensee from selling.

What happens to our stock when the licence ends?

The sell-off clause decides, and licensor forms give a short period and sometimes none. The review asks for a sell-off period for approved products, a right to complete orders accepted before expiry, and an obligation on the licensor to buy or allow the sale of stock where it ends the licence without cause.

Related guidance and services

• Contract review, £495, the service this page describes
• Terms and conditions drafting, £995
• Reviewing a trade mark licence
• Reviewing a licence agreement for your product or brand

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.