Our client, a Hong Kong company, is the regional headquarter for a well-known French food and beverage brand which has entered into licenses with local operators in a number of jurisdictions in Asia Pacific, including but not limited to Cambodia, Dubai, Hong Kong, the Philippines and Singapore. The brand is constantly initiating and conducting discussions with potential new licensees for opening in new countries. When our client contacts us to review their contracts, we are already familiar with some of the existing license agreements, having dealt with them on a case-by-case basis to assist with punctual issues, such as late payments or breach of various guidelines.
CHALLENGE
Our client is seeking an in-depth review of its standard license agreement to take into consideration the many issues they have already encountered and have suitable clauses to address such. We were also instructed to review the whole chain of contracts needed for signing a new licensee:
- non-disclosure agreement: mutual confidentiality agreement to protect the information exchanged for both parties in the evaluation phase;
- memorandum of understanding: non-binding agreement which set out the road map to validate the business plan (number of production centers and points of sale, schedule) prior to entering into the license agreement itself;
- license agreement.
ACTIONS
We conducted interviews with our client’s coordinating staff in order to have first-hand feedback on the issues encountered and suitable remedies. Our client’s coordinating staff shared with us many ad-hoc documents they had created to support their work, which were used on a regular basis, for key obligations of the licenses such as approval of new points of sales locations, decoration, third-party products etc. although they were not mentioned in the license agreement and their contractual value was uncertain.
We validated our solutions with our client to the points raised by their coordinating staff, including the standardization of the various ad-hoc documents created and gradation of sanctions (from warning to liquidated damages) in case of material breach – more suitable to our client’s aim than terminating the agreement.
OUTCOME
Our client had a full set of suitable standard documents for negotiations with potential new licensees which enabled the management to focus on business negotiations without worrying about the suitability of the documents. Further down the road, a number of previous pitfalls could be avoided and relationships with licensees improved through increased clarity on expectations. We were no longer needed on a case-by-case basis to assist with punctual issues.
