Bret Schnitker, Emily Lane
October 7, 2025
Bret Schnitker 00:09
Licensed companies if they're going to license that out right, that for them is a income stream, and they have to make the right decision with a partner that they think will maximize that income stream.
Emily Lane 00:35
Welcome to Clothing Coulture, a fashion industry podcast at the intersection of technology and innovation. I'm Emily Lane
Bret Schnitker 00:42
and I'm Bret Schnitker. We speak with experts and disruptors who are moving the industry forward and discuss solutions to real industry challenges.
Emily Lane 00:51
Clothing Coulture is produced by Stars Design Group, a global design and production house with more than 30 years of experience.
Emily Lane 01:02
Welcome back to another episode of Clothing Coulture. We're back at the bar, our space for open, honest conversations inspired by your questions. Today we're diving into the world of licensing. For many brands, Licensing can be a strategic path to growth and expansion. On the flip side, companies taking on a license can gain access to new markets and audiences. But how do you know when the timing is right? What are the key considerations on both sides of the table? In this episode, we're unpacking the licensing landscape and exploring what it really takes to make it work. So Bret, let's just start with the basics. What is apparel licensing?
Bret Schnitker 01:44
Sure it's a it's a segment of our market that that allows for individuals to enjoy the benefits of a brand that has established the brand awareness right to a certain level, and utilize the name of that particular brand on products to drive business. And that takes a lot of shape are a lot of different forms. Sometimes the brand is a hot brand that exists in the market and everyone wants it, and that brand is kind of exclusively focused on a narrower range of product. And the brand that's really hot might want to expand and pick up revenue, but does not want to spend the time and effort exploring, or doesn't have the expertise to explore other categories, so they'll very strategically license out categories. So a big apparel company, super hot company, wants to build the apparel, but then not the shoes, not the shoes, or not perfume, a completely unrelated category, so they'll license that to a really effective perfumer, and that can then build and expand an existing hot brand. So that's one of the views of licensing and the opportunities that exist for licensees and the licenser, or, frankly, there's another view of a of of a licensees licenser or opportunity, when a brand has either hit peak or is post peak, it's gone through its explosive phase, it's maxed out of a ton of product, and it's now sort of either post peak or way post speak, and that that brand wants to then expand into every category, make as much money as they can before the brand eventually, kind of just dies, right? Sometimes, brands have a life cycle, and so a brand that has sensed that they have milked the brand for everything it can be, and it ends up being post peak, they'll aggressively brand a number of different or license a number of different categories just to bring in a ton of revenue before they lose that demand cycle. Then there's this very, very post peak kind of scenario where the brand is kind of gone it lost its traction. Really, people remember or have awareness of the brand, but it's not really actively trading or moving in the market and and people, if they want to have a little more additional benefit, to go sell that to a customer, it's better sometimes they make a decision to pick up that license, because it has some brand equity. If somebody's Google, you're looking at it versus starting a completely new brand, which takes a ton of money and investment to build brand equity and brand awareness.
Emily Lane 04:53
Okay, you literally just answered the question I was going to ask you.
Bret Schnitker 04:58
So are we done? I'm just gonna go get a drink.
Emily Lane 05:02
I guess I would like to know, Are there additional benefits to taking on a license, if you you know, you're already a company that that makes product, you know, versus, you know, just expanding on your own, like, let's say I'm the apparel brand and you know, maybe the decision is to broaden my collection versus, you know, taking this whole new arm on, like, when is that? When's that right?
Bret Schnitker 05:35
If you're speaking from the licensees point of view, there are a ton of companies that have made decisions instead of building their own brand and build product, even if they have perhaps they have one brand, and it's their own brand, and it's doing well, and they want to build the volume of the company right there are some billion dollar companies out there that have just made a wonderful living of collecting, collecting brands being very strategic, understanding where that brand is, and life cycle, understanding which categories are the best performing cattle categories, and have bought a number of those, and it speeds up their ability for their sales people to go market that to end customers. Sometimes it's a strategic conversation where a supplier, a garment company, has a relationship with a large department store, and the department store has confidence and has history with them, but they want to expand business together, and so they find a specific brand that might, might be in one of those three positions. Sometimes it's a position that's, you know, it's been out there for a long time, but they're looking to to move it on. But the customer has a lot of awareness. It's not a fully dormant brand. And they'll together, make a decision. The retailer will tell them, tell the clothing company, look, well, we'll buy seven to $10 million of the product a year at a minimum. You go buy the license, you design and develop the product and deliver it to the retailer, and there's this great relationship, and that's what we call kind of a captive branding strategy. Retailers, for years have had things called private labels, and it's a it's a brand that's developed internally at a big department store or at a specialty store chain that the customer just believes is a brand name like anything else. Retailers and internally kind of look at those as different brands and along that path, along that journey, and over a number of years, it used to be a place to put low value product that you promote. You'd have all the exclusive brands in your store to bring the customer in, and then you have these private labels to say, Oh, 50% off, and great deals. And here's a really, really cheap core product. And and customers would be like, Oh, I'm gonna buy that. But oh, my God, look at that deal. And they would buy that. They were usually kind of high margin, lower product, lower product, or lower quality product things. And then that started to evolve. They started realizing that it didn't need to be that. So they would expand categories, they'd spend a little money, maybe developing the brand a little bit more in the brand equity, and for the customer, they've never known any difference, right? And so from that point, they kind of realized, hey, private label works. But how do I do this Supercharged private label? And that's where this whole captive branding is coming. It's kind of a glorified private label.
Emily Lane 08:51
Are there sourcing strategies, like, if you own all of these brands, you know, you're one of those companies we talked about that have 20, 3050, brands. Are there sourcing strategies that can be really, really beneficial by having so many brands under your umbrella? Or is there a autonomy from brand to brand?
Bret Schnitker 09:11
Different companies work differently? I will tell you that if the brands are doing what they should be doing, the licensed brands are doing what they should be doing. They're providing a lot of overall volume to a number of different end use customers. But within the assortment, you will find a lot of commonality. There are core fabrications that every brand uses. For example, every brand, let's say, has a t shirt. That t shirt is made of 30 singles jersey fabric. You can for one brand, you can wash it or acid wash it for another brand. It can be clear, but the fabric is a core basic a good strategic company will understand the commonality. Across all of the licenses within their departments, and buy and leverage the volume across all of those for particular fabrications or manufacturing. You know, you could take a basic t shirt and put different labels on it, wash them different ways, but the overall leverage of that volume helps drive down price, and
Emily Lane 10:19
that makes sense,
Bret Schnitker 10:19
more profit.
Emily Lane 10:20
You mentioned earlier that in a in a partnership, you know, a retailer might agree to, you know, buy a certain amount from this license each year, which made me question, in license agreement, are there kind of expectations on what kind of volume you will be providing that that brand
Bret Schnitker 10:42
always that's their intent anyway, okay? And therein lies the strength and the due diligence that you need to do when you're looking at a license. License companies if they're going to license that out right? That for them, is a income stream, and they have to make the right decision with a partner that they think will maximize that income stream. So if it's a relationship where they don't know that manufacturing partner that they're licensing to the licensee, oftentimes carved into a contract is a minimum revenue guarantee, and so while they get a certain usually the license or gets a certain percentage or royalty on every piece sold. In addition to that, they set minimum expectations for what that revenue looks like. It's not always the overall overall revenue of a particular license agreement, it's how much money the license or can expect at a minimum. So simple terms, I want 8% on everything that's sold, yet every year you need to pay me a minimum, $150,000 in royalties, whether or not you do enough volume to do that.
Emily Lane 12:00
How long are these agreements usually in place?
Bret Schnitker 12:04
I would say an average time should be around three years. As you pick up a license, you've got to get everything you put people together. They usually have evergreen clauses. If you're hitting all your parameters, then the license automatically renews. But every licensor has different ways to go about it. They might be testing a license E and say, Hey, I'm going to give you one year, and then we're going to renegotiate the contract based upon where I see your volume to be. Sometimes a licensor will have a brand that might not be all that salient for a customer at that particular time, so they'll be open to making more deals, hoping to, you know, generate money in a in a licensed name that isn't, that isn't, you know, in serious demand.
Emily Lane 12:49
How does a licenser or protect their brand equity, or ensure brand consistency,
Bret Schnitker 12:57
depending on the license or they will have the right to view all the collections up front. So, you know, in typical retail we have these things called open to buy plans, assortment plans, mood boards, assortment boards, illustrations of what the collections look like. You know, for us, we do full 3D so you get to see it pretty real, right? And they can have review moments where each and every year they'll take a look and make the approvals generally in flat sketches or 3D design, and the licensee will explain to them what they're looking to do. There are also always over arching minimum requirements for logoing, size colorations of logos, brand statement, kind of things that always are spelled out that they can't deviate from. And so I think this combination of communication between the licenser and the licensee, and the understanding and spelling out what needs to happen what doesn't, keeps keeps that relationship moving down the path. Sometimes, again, if it's a kind of more of a dead brand, they have a general dialog about what the expectation looks like, but they tend to be a lot more open, because it's like, Hey, if you can make this brand generate some cash, we're a lot more flexible. When a brand has a lot of cachet and a lot of brand identity, you've got to be that much more of a steward of that. So a customer doesn't come into a store and say, Wow, that doesn't look like that brand.
Emily Lane 14:37
Yeah. What are the risks in licensing, and is there such a thing as over licensing?
Bret Schnitker 14:46
Boy, I would imagine there probably is such a thing as over licensing, if you get yourself wrapped up to a lot of minimums and don't have the sales force or the revenue channel to go out and do that for me, in what we've seen in licensing. Thing, the real risk is not understanding the demand. Look, it's the licensors job, and the salesman for the licensor to promote the brand as if it's the best thing in the market, right? Explain, through as much detail as they can why a licensee should buy that brand, right? That's their job. The benefit to the licensor is that they're gaining royalty and income, but not experiencing any risk, technically, in terms of inventory, time spent, overhead, markdowns, you know, there's all these things that they don't have the risk so they look at a pure income stream, the higher the revenue of that licensees opportunity, and the more categories that they've licensed out. The risk for the license or is, if you don't ask all the right questions, you don't look at the history of the brand, you know there's reasons why, if you ask the right questions that you know, a category is opened, let's say in a particular license. Well, why is that category opened? Who had that before? What kind of volume did they run when they don't answer a lot of those questions very effectively, and can't be very transparent in terms of telling you what that volume was, how that relationship went, why that ended, why the categories open? There's some red flags. Would it create risk? The licensor has a lot of risks, because if they walk in unknowingly to a brand that has been damaged, right? A licensee can damage a brand for all subsequent licensees. You know, retailers are like elephants. They never forget. And so if a brand goes into a shop, and big retailers always deal with sales per square foot. And so they make decisions on if a brand or a category gets put in a space, they take a look and see how much volume is generated by square foot for a certain brand. And so if a brand goes in and makes a big mistake in terms of not being on market trend or having quality issues, or, God forbid, not even delivering on time. Retailers never forget that, and it doesn't matter whether or not the licensee shifted, the brand is then tainted, right? If the brand has made missteps from marketing, that can be a challenge. So if the, let's say, sometimes a license is tied to a a name. Could be a celebrity, it could be a designer, it could be, you know, all sorts of things. If the individual license is both tied to, let's say, a designer, a celebrity, and they the celebrity. The designer must be involved, right? And can be difficult. A licensee can all of a sudden find themselves in a tough position, because the designers dictating what styling needs to happen. He can stall things out. He can create all sorts of issues. And if a licensee, let's say, is a really good merchant and knows their customer and signed onto a license for a particular reason, and the designer says, No, we're not going in that direction, you end up really being challenged because you're committing to inventory.
Emily Lane 18:37
It sounds very scary.
Emily Lane 18:39
Has this seen any major shifts in the last few years with, you know when, when the influencer space came into play? Did, or, you know, you mentioned celebrities? Have there been a lot of transitions and into licensed brands, and you know how they're operating and how, how exciting they can or cannot be for someone to take on, sure.
Bret Schnitker 18:39
Look. It can be super lucrative if you ask all the right questions, you take your time, you dig into detail, and you find the lightning at a bottle. License opportunity, it can be great, right? It's just there are a lot of things that you have to consider about license business.
Bret Schnitker 18:45
I mean, as business evolves, as as we see new opportunities for evolved brands, right? Like you mentioned, influencers, at one point, influencers were thought to be able to drive tons of business because they can put on a garment, and all of a sudden that that brand explodes, or the garment explodes, and therefore a lot of licensed companies would go to these big influencers and say, Hey, you really don't know how to build garments. You don't have a company. You. But boy, you've got 10 million followers. Let us partner with you. We will craft a license together. We'll give you a percentage, we'll take a percentage, and we'll go license your product. What they found was, sometimes all of these things would be developed. There would be this massive kind of infrastructure, infrastructure built because the the influencer was really hot at the time, and then the influencer makes a major misstep, and the entire system collapses. And so, yes, they've evolved. And there was this period of time where influencers were you got really excited to license and influencers name or a brand, and then people got their fingers burnt pretty quickly when they found out maybe the license, license wasn't that effective for a particular, you know, influencer. And so that happens. Different markets get hot, outdoor space, you know, right? Luxury markets are now suffering in a big way. There's consolidation in the performance market like Nike and Under Armor and all this. And so Nike has its set of licenses. They license out golf, they license out categories, and sometimes they've just flat out cut out license categories because it didn't mean that much to them, only to find now maybe that their volume is going down, and they kind of wish they still had that revenue.
Emily Lane 21:31
Yeah, I think at some point you could be over saturating your brand.
Bret Schnitker 21:36
Well, a lot of these big guys have really made a pretty hard step at doing that,
Emily Lane 21:41
right? Okay, well, thank you for this deep dive into licensing the business of borrowed brands. Do you have any other thoughts to share before we wrap it up today?
Bret Schnitker 21:48
Just do your due diligence.
Emily Lane 21:50
Good advice always. Well, thank you for joining us today at this conversation at the bar. Don't forget to subscribe blah blah Don't forget to subscribe. To stay apprised of upcoming conversation.
Bret Schnitker 22:03
Is that pure vodka?
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