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Operations

When licensing, finding the right partner is a must

The market for branded retail items is growing, but cashing in is no easy feat.

Dunkin’ Donuts was hardly the first coffee chain to place its name on bottled iced coffee. But Dunkin’ waited until it had the right product and the right partner to push forward with that licensing endeavor. The chain rolled out its iced coffee in February 2017 at retailers nationwide. Within one year, retail sales of the coffee exceeded $150 million, says Brian Gilbert, senior director of new business development for Dunkin’ Brands.

Dunkin’ and its licensing partner have been so happy with the sales performance that they’re about to add a fifth flavor to the lineup. Why not, considering that less than 3% of all licensed products launched annually hit the $100 million mark, which Dunkin’s bottled iced coffee left in its rearview mirror. 

For Dunkin’ Brands, licensing has been a no-brainer. Sales of its 10 licensed products—ranging from bagged coffee to K-Cups and ready-to-drink coffee—recently surpassed the $850 million mark. Now, the chain is striving to reach $1 billion in licensed product sales within the next few years, Gilbert says.

What’s more, the overall world of product licensing continues to grow. The Top 150 Global Licensors, published annually by License Global, reports annual growth in retail sales of licensed merchandise worldwide in the billions.

While Dunkin’ has found success, Gilbert admits that it’s not easy.

“You have to do your research,” he says. “You have to make sure you add value and have a point of difference.” And most important, he says, “It tends to work best when the licensee sees the product as their own—and not a licensed brand.”

That can be the biggest challenge for many operators, says Gilbert. When going into licensing, chains are giving up their brand to another company. That’s why it’s so critical to focus on the right partner and to work only with leading companies in the category, he says. For example, Dunkin’ partnered with J.M. Smucker Co., makers of Folgers, to make its bagged coffee. For this pairing, it was critical that the two brands didn’t compete with each other, but were instead complementary, he says.

"We've learned to only partner with manufacturers who also are good marketers." Roland Dickey, Dickey's Barbecue Pit

Dunkin’ shares 50% of its licensing revenues with its franchisees, says Gilbert. The program began in 2015, when Dunkin’ expanded sales of its licensed K-Cups and packaged coffee from its stores to grocery, retail and online outlets. Thinking beyond production, Dunkin’ worked with its partners to further sales: Smucker, for example, agreed to exclusively distribute Dunkin’s K-Cups at grocery stores.   

While not as big as Dunkin’ Brands, Dickey’s Barbecue Pit also has embraced product licensing. It has licensed its sausage, beans and barbecue sauce, and more recently has investigated licensing its name for grills, smokers, tongs and grill brushes.

But CEO Roland Dickey has this advice for brands eager to license: Think hard about the product and how it fits in the current retail market. “It’s a pretty crowded space, and there’s lots of competition,” he says. If a brand has something unique to offer, though, it might be worth it, he says. But does the licensed product also make sense for the brand? Having its name stamped on sausages or grills at retail outlets is brand reinforcement for its restaurants, says Dickey.

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