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Licensing 101: What is Common Marketing Fund?

16 January 2015

Nowadays, Licensors are starting to switch over to the concept of a Common Marketing Fund  (CMF), often collected, held and spent (with licensor’s approval) by the agent.  The principal of a CMF is, as it suggests a fund commonly held to market the property(ies) into which all or most licensees contribute.

The advantages of this are that it lets the local office of the licensor, or the agent, be more pro-active about what marketing activities it will be able to undertake on behalf of the licensees, because it will know how much money it has to work with, and it won’t have to spend lots of wasted energy begging the licensees for each individual marketing activity to pitch in this or that amount.

Also, it generally creates a virtuous cycle whereby as more funds come in, more marketing happens, and thereby more products are sold. Repeat.

On the downside, it can create some accounting problems for whomever is holding the funds as governments and auditors will want to treat it as income and tax it, as opposed to it being money pre-collected from a variety of parties for the purpose of joint marketing.  Additionally some licensors may not be comfortable with agents collecting monies on their behalf.

But by hook or crook, more licensors are converting over to the model or other more pro-active variations in order to ensure not only competitive levels of local marketing for their properties but also that the licensees fund most of it.  I see this trend continuing.

More next time….