How to license a character and turn it into products

What licensing is

Licensing means renting the right to use someone else’s protected intellectual property (IP), such as a character, name, logo, artwork or likeness, on a product, service or promotion. The owner keeps the IP; you pay to use it within agreed limits.

Toys and games are the most visible part of licensing, but the same model runs across almost every consumer category:

• Apparel, footwear and fashion accessories
• Plush, toys, collectibles and blind boxes
• Stationery, cards, posters and publishing
• Gifts, homeware and lifestyle products
• Food, drink, health and beauty
• Electronics and accessories
• Promotions, gift-with-purchase and events

Licensed products are no longer only for children: retailers increasingly use licenses to reach adults, from retro and nostalgic properties to collectors and fans buying for themselves.

The market and the main types of license

Industry surveys put character and entertainment at the top of the licensing market: about US$122 billion of licensed retail sales in 2017, roughly 45% of the global total (LIMA survey, as reported in the BLE 2019 handbook). It helps to think of licensable IP in three groups:

Brand owners license because it earns revenue, extends the brand into categories they could not make themselves, borrows the skills of specialist licensees, reaches new customers and helps protect the trademark across product classes.

Is a license right for your business?

Licensing is open to smaller companies too: you do not need to be a giant to approach a rights owner. Before you do, answer these questions honestly:

• Which properties already sell well in your category, and why? Would the same logic work for the one you want?
• Is there room on the shelf for another property, and how would yours stand out?
• What will be popular 12–18 months from now, when your product actually launches?
• Which retail channels suit the product, and who is the core shopper there?
• Do the property’s values fit your own brand and customers?
• Can you afford the royalty, the minimum guarantee and any marketing commitment?
• Does the licensor’s approval process leave enough time for product development?

Key licensing terms, in plain words

Property / IP

The character, brand, artwork or name being licensed.

Licensor

The owner of the IP.

Licensing agent

A company appointed by the licensor to manage its licensing program in a market.

Master licensee

A company holding broad rights for a territory, which may sub-license or appoint manufacturers.

Licensee

The manufacturer, retailer, service provider or agency granted the right to use the IP.

License agreement

The contract setting out what may be made, where, for how long and on what terms (the commercial terms are often called the schedule).

Articles

The exact products the license covers.

Term & territory

How long the license runs, and the countries or channels where the products may be sold.

Royalty

The percentage (or fixed amount) paid to the licensor on each sale, usually on net sales.

Advance

Royalties paid ahead of sales, typically on signing, then credited against royalties earned.

Minimum guarantee (MG)

The least royalty the licensee owes over the term, whether or not sales reach it.

Royalty statement

The report of what was sold and at what price, usually filed every quarter.

Common marketing fund (CMF)

An extra contribution, often around 2% of sales, pooled by the licensor for retail and marketing support.

Sell-off period

Time after the term ends to sell remaining stock, commonly 90 days, without manufacturing more.

Style guide

The licensor’s rulebook: approved art, colors, fonts, proportions, packaging rules and legal lines.

The first conversation with a licensor

A licensing meeting is a two-way assessment. Come prepared with numbers and examples, and ask as much as you answer.

From handshake to contract

1. 1
   Align on the plan

   Product vision, channels and a sales forecast, discussed as early as possible.

2. 2
   Deal memo

   A short heads-of-terms document with the main commercial points, approved internally on both sides.

3. 3
   Long-form agreement

   Legal terms plus your deal’s schedule. It can take weeks; avoid big spending until the deal is approved in writing.

There are three common structures:

Most licenses are non-exclusive: the licensor could grant similar rights to others. Exclusive deals are rare and expensive; a sole license (only you and the licensor) is a common middle ground. Define the articles precisely: "clothing" is too broad, while "100% cotton short-sleeve adult T-shirts, sizes S–L" is clear. The broader the scope, the more you usually pay.

What a license costs: royalty, advance and minimum guarantee

The royalty is normally a percentage of net sales: your invoice price minus a short list of agreed deductions, such as returns and trade discounts. It can also be set on retail price, on the FOB price or as a fixed amount per unit. Because the FOB price is lower, an FOB royalty rate is typically 2–4 points higher.

Licensors usually ask for an advance and a minimum guarantee (MG). Build them from a realistic forecast: units per year × price × royalty rate = projected royalties for the licensor.

Royalties are reported and paid every quarter, usually within about 30 days of quarter end, often through the licensor’s royalty system. Some licensors also charge a common marketing fund of around 2% of sales. A few deals use a one-off flat fee instead, typically for promotions or campaigns where a per-unit royalty is impractical.

Term, territory and the clauses to read twice

Term: entertainment licenses typically run 2–3 years because a property’s peak can be short; corporate, lifestyle and art brands often run 3–5 years or longer. The clock starts at signing, and product development can take months, so make sure you keep enough time to actually sell.

Territory and channels: where you may sell, and sometimes which retailer types or named retailers are allowed or excluded.

• Launch dates: a set marketing date, and sometimes penalties for launching late.
• Sell-off: commonly 90 days to sell remaining stock after the term, with no new production and no dumping.
• Minimum orders or production quantities.
• Audit rights: licensors may audit sales; most findings come from net-sales calculation errors.
• Trademarks: which registered marks you may use and how.
• Reporting: royalty statements, plus forecasts and re-forecasts during the year.
• Insurance and product liability naming the licensor, and compliance with the destination market’s safety rules.

Designing and approving the product

This is where licensed programs succeed or fail. The licensor knows the property best; you know your customers and your product. Plan the launch date backwards and build approval time into the critical path: each review can take anywhere from same-day to about three weeks, depending on the contract and on time zones if an agent has to refer to an overseas licensor.

1. 1
   Concept

   Sketches or mock-ups of the whole range, so the licensor can judge it as a set.

2. 2
   Artwork

   Detailed designs with Pantone references, materials, decoration and any mechanics.

3. 3
   Strike-off

   The first physical test of colors, embroidery, print and finishing against the artwork.

4. 4
   Pre-production sample

   The finished product before bulk. At Takara, the signed Golden Sample becomes the reference every bulk unit is inspected against.

The style guide is the working spec: character art and proportions, color references, fonts, patterns, packaging rules and the legal copyright line. Modern style guides also carry product ideas and trend packs. Read more in our licensing style guide article.

Making licensed products in Vietnam

Once the license is signed, the hard part is making product that is on-model, compliant and on time. Takara works with a vetted network of partner factories in Vietnam and China, each audited on quality, environmental practice, labor standards and production integrity before an order is placed. How Takara vets partner factories.

• Your style guide becomes the factory brief; color is held to your Pantone references.
• Physical samples for each approval stage, then a signed Golden Sample before bulk.
• 3-stage QC: raw material, in-line (DUPRO) and final AQL 2.5 inspection, documented for every shipment.
• Testing to the destination market, such as EN71 for Europe or ASTM F963 for the US, through partner factories and accredited labs. Declare every market at inquiry.
• Orders, samples, documents and shipments followed in Takara Portal.

See how a licensed program runs end to end on our Licensed Merchandise page, or the full production process.

Licensing in practice: Takara case studies

Takara has worked on every side of a licensing deal: as a licensee, as an OEM manufacturer for a master licensee and as a sourcing partner for US retail.

LicenseePokémon in VietnamLicensed apparel and plush under Takara’s Mirako brand from 2016, official licensee from 2018: 8 SKUs in 230+ retail doors.OEM for a master licenseeDoraemon, Shin-chan & One PieceManufacturing for Tagger, the master licensee in Vietnam, since 2018: 26 SKUs built to Japanese licensing QC.Brand campaignRohto blind box7 designs, R1 samples for the first 3 in 7 days, 23,400 plush delivered 25 days ahead of contract.Film merchandiseGalaxy Cinema “Thỏ Ơi”5 SKUs and 3,500 units in 21 days, timed to the film’s release under strict character-design compliance.

Where to meet licensors in Asia

Trade shows are the fastest way to see what is available and book meetings. Plan ahead: big rights owners fill their calendars early, meetings are often 30 minutes, and walking the whole floor surfaces properties you had not considered.

• Vietnam Licensing Expo & VCIPC, organised with VCIPLA, the Vietnam Cultural and Intellectual Property Licensing Alliance, of which Takara is a founding member.
• Hong Kong (HKTDC): the Asian Licensing Conference and licensing shows in Hong Kong, a long-standing gateway between Asian IP and global buyers.
• Brand Licensing Europe (London) and Licensing Expo (Las Vegas) for global properties.

Licensing FAQ