Cheeseburger in Paradise

This article in Chain Leader magazine about the 34-unit Cheeseburger in Paradise chain of casual dining restaurants brings up just how widespread licensing is.

The company licenses its name from Jimmy Buffet's Margaritaville Holdings, and comes from a hit song Buffet made famous decades ago. The notion of branding a restaurant chain with a pop song lyric might seem strange, but it's no weirder than some of the concepts that have made their way into the foodservice world. We had a client that owned a rather pedestrian shellfish brand tell us they wanted to see it licensed to a restaurant.

Yeah, right.

The article doesn't just show how pervasive licensing is, but how it can't succeed without making sense. The chain was originally owned by the heavily-leveraged OSI, owners of the Outback Steakhouse chain (among others). OSI was getting hammered by Wall Street when it was a publicly-traded company, so the chain's management team borrowed truckloads of money and went private, thinking "we won't have to answer to those annoying money guys every quarter and can do what's right for long-term growth."

Unfortunately, their timing couldn't have been worse. The casual dining segment of the restaurant biz was already in trouble when the economy went South, and consumers have consistently voted with their feet since then, opting either for cheaper meals out (trading down to Fast Food) or by staying home. OSI dumped Cheeseburger for $2MM recently, spinning it off to a group of investors.

Fortunately for Cheeseburger in Paradise (the restaurant), some sanity has prevailed, and the licensor (Jimmy Buffet's people) have lowered the royalty rate. One of the trickiest propositions in licensing is negotiating a fair royalty rate, both for the licensor and the licensee. If the rate is too low, the licensee gets rich off your brand. If it's too high, the products end up being priced out of the market and the deal is a flop.

The lesson from all this is two-fold: you never know where licensing is going to turn up, and make sure sanity prevails when negotiating a licensing deal.
Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)