Teach Soap

Hello,
I make a soap and a few other products pertaining to laundry care. I have sold them retail and wholesale for years, and this year I started making them in a private branding agreement for a large company as well. Trouble is, I'm in Alaska, and the cost of shipping the finished product to them hundreds of pounds at a time isn't leaving them much, if any profit. I would like to help them find a local soapmaker to produce it for them. I'm a little worried about "sharing" my secret recipe...any experience in this would be appreciated.

What sort of annual licensing fee do you think would be appropriate? What figures would you base this number off of? How would I protect myself from that same soapmaker making another product to compete with either or both of us? Or worse, if they decided to alter the recipe slightly and then not renew the license, claiming that it was "their" recipe now.

Also, if we entered a licensing agreement, so that they could have their own private brand produced with my recipes, I would also want to have an option for other stores to hire local soapmakers to make MY brand for them. My wholesale accounts have the same concerns about shipping product to the lower 48...Would you suggest charging a lesser fee for this?

Another separate option under consideration is that I have a local business handle the retail and wholesale shipping/distribution of my own branded products. We have a busy, growing family, and managing production AND sales is getting a little tricky. I'd love to keep making soaps and have someone else take care of getting them to my customers. I was thinking that the orders would still come through my site, and so would the payment, but then I'd forward the order, the money for shipping, and a percentage of the sale to the distributor to take care of. What do you think?

Thanks in advance,
Meg

Unfortunately you are in a pickle because recipes, soap like food, are not truly proprietary. Anyone can take your product and figure out your recipe and use it. There is nothing that can be done to stop that aspect of it. If you can find someone to enter into an agreement with you to make your recipe and sell under your label, yea for you. I would contact an attorney, one who specializes in business contracts and franchising agreements, and work through them. Since you already have a client for them you may be able to work a commission type deal based upon the product ounces sold or an annual "franchise" fee. Honestly, if you want someone who has experience you will probably have a more difficult time doing the franchise, annual fee deal. As I would expect the more established soaper to have already created their label/brand. Where a newer soaper may need recipes to follow, they may lack the experience you wish to pass along to your customer.

At any rate, since recipes are not truly proprietary, I think I'd be looking more along the lines of passing your client off to an experienced soaper for a percentage of what they sell to that client. There is no real way to enforce further fees that I can see. Maybe someone would be willing to pay a larger, upfront fee for the recipe and then a percentage for the sales to that client for a certain time frame. It is always what the market will bear, so you never know til you throw it out there, but you should contact an attorney and see what they have to say.

Much luck to you!

ETA: Sorry, I just realized that you are doing a private label deal with your client, so the branding isn't an issue. Still, recipes are not proprietary. Even so, it should be easier to make an agreement to pass of the client and get you a "finders" fee for doing so. I don't think you will get nearly what you are probably thinking though, unless you can work a deal to sell the recipe to the company you are making it for???

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Tammy