Hoping for Happily Ever After

Earlier this year, two licensors reworked their deals with important licensees, granting them perpetual licenses within their categories. This is a relatively uncommon deal structure where a significant upfront payment, typically in lieu of an ongoing royalty, gives the licensee ownership of their category indefinitely, with the IP owner retaining rights to the underlying brand. The specifics of the deals vary, with nuances in the payment structures and the amount of control and collaboration that rests with the licensor, among other differences. 

Often a perpetual licensing deal is the solution when the licensor is facing steep financial challenges and needs a big infusion of funds. But these types of agreements can also make sense for strategic reasons, as in the eyewear category, where three of the eight examples outlined here occurred. In that case, consolidation among powerful players, as well as big fashion conglomerates opening their own in-house eyewear divisions, have driven some companies, especially the smaller ones that are competing with the behemoths, to permanently lock in the rights to their most successful licenses.

Examples of perpetual licensing agreements over the past several years, including the two from this year, give a sense of the kinds of situations where these deal structures can occur: 

• In May, TGI Fridays replaced its existing traditional license with Kraft Heinz, which began in 2015 and was most recently renewed in 2021, with a perpetual license giving the latter the right to continue to sell TGI Fridays-branded frozen appetizers at retail, and add new flavors and varieties, in North America. The companies planned to continue to work together to bring new products to market under the deal. The brand, which currently identifies 25 appetizer varieties in grocery stores, is an important part of Kraft Heinz’ frozen food business and a growth driver in North America; the company believed the new deal would help it accelerate that growth. For TGI Fridays’ part, it used the proceeds to pay back $137 million worth of debt. The company, whose management lost control of much of the business about a month ago after failing to meet its commitments to bondholders, has seen sales decline and has closed many locations in the past few years. Just last month, its U.K. master franchisee filed for administration, put its 87 stores up for sale, and abandoned its plans to purchase the U.S. parent business. 

• Also in May, Authentic Brands Group granted Safilo a perpetual license for the David Beckham Eyewear business. The new deal replaced the existing contract, which began in 2020 and was set to expire in 2030; this is a relatively new deal compared to most that transition to perpetual licenses. Safilo will continue to oversee production and global distribution and work with former soccer star Beckham on the design of the line. ABG noted that the perpetual license helps it “secure another cornerstone of [its] portfolio with one of the most successful eyewear brands of recent years.”

• Kodak revealed in July 2023 that it was signing a perpetual global licensing agreement with another eyewear marketer, EssilorLuxottica, one of the giants in this category. Effective January 1, 2024, the new deal indefinitely extends the existing relationship between the two companies. EssilorLuxottica continues to develop, manufacture, and distribute optical products and services under the brand. 

• In 2022, the Estée Lauder Companies took over full ownership of the Tom Ford luxury label, after being a long-time partner in the beauty category. At the same time, it extended the brand’s deals with Ermenegildo Zegna for fashion and Marcolin for eyewear, with the latter entering into a perpetual license for an upfront royalty payment of $250 million. Marcolin had been the brand’s eyewear licensee for two decades and said the deal would enable further growth for the line. 

• In December 2020, Revlon granted Helen of Troy, its licensee since 1992 for haircare appliances and tools, an exclusive global license that was not perpetual per se but was for 100 years—a 40-year deal with three automatic 20-year renewals at Helen of Troy’s option—in return of an upfront payment of $72.5 million. There are no ongoing royalties over the course of the deal. The brand has long been a driver of the licensee’s haircare business, which had more than doubled in the years prior to the agreement, and the perpetual license would help it spur further growth, the company said. A few months before the deal, Revlon had been on the verge of bankrupcy until it completed new negotiations with its lenders. 

• Transformco, owner of some of the troubled Sears Holdings’ assets, announced in December 2019 that it had sold its core DieHard battery business to Advance Auto Parts for $200 million, allowing the latter to carry DieHard batteries in its existing retail channels, including Sears, as well as its own 4,800-plus stores. It also gained the right to extend the DieHard brand into other automotive and vehicular categories, and, through an exclusive, royalty-free, perpetual license, to develop, market, and sell DieHard-branded products in non-automotive categories such as sporting goods, lawn and garden, and workwear. 

• In August 2018, Starbucks said that it had granted Nestlé perpetual rights to market Starbucks consumer packaged goods and foodservice products globally, outside of the company’s own coffee shops, receiving a $7.15 billion upfront payment from the licensee in return. Starbucks also continues to receive a royalty on sales. The two companies planned to continue to collaborate on the line of roast, ground, whole-bean, instant, and portioned coffee—but not ready-to-drink beverages—under the Starbucks, Seattle’s Best, Teavana, VIA, and other brands. About 500 Starbucks employees in Europe and the U.S. joined Nestlé as part of the partnership, termed the Global Coffee Alliance. In 2021, ready-to-drink beverages in Southeast Asia, Oceania, and Latin America were added to the contract. In 2022, the partners said the Starbucks business generated $1.6 billion in incremental sales for Nestlé that year, with products sold in nearly 80 global markets. 

• Sears Holdings Corporation sold the Craftsman brand to Stanley Black & Decker in January 2017, giving SBD the right to develop, manufacture, and sell Craftsman-branded products outside of Sears stores. In this case, the new owner granted the former owner, Sears, a perpetual license that allowed it to continue to sell Craftsman products, supplied by its existing vendors, in its own stores. (As of 2024, Sears continues to shutter locations, and there are only nine left.) The license was set to be royalty-free for 15 years from its inception and royalty-bearing (at 3%) thereafter. Since 2017, Craftsman products, including many licensed categories, have seen their retail distribution expand dramatically; they are now sold everywhere from Lowe’s, Ace Hardware, and Amazon to farm and fleet stores. 

Occasions where licensing partners forge perpetual licensing deals remain relatively few and far between, but the practice is becoming more common as time goes on. The trend is an interesting counterpoint to the many short-term, limited-scope collaborations that tend to be favored over standard licensing agreements in many categories these days.