Failed Licensing agreement

A recent failed license agreement is the deal between Fat Head's Brewing, based in Ohio, and a Portland, Oregon operator. The deal will be mutually terminated at the end of March 2018, after four years (Bamman, 2017). Fat Head's owner cited a misalignment of vision for the future as the reason why the agreement failed (Artist, 2017), and the Portland operator will open under a different name at a later date.

The Fat Head's brand was licensed for the brewery initially because of the credibility that the brand had within the craft beer community as make of several highly-reputable beers, and the owners of Fat Head's were excited about the opportunity to build out a national brand presence. The nature of the relationship was as follows. The Portland operator would build and manage the brewpub and restaurant. The branding would come from Fat Head's.

Building such a large facility in a highly competitive market like Portland demanded immediate differentiation, which the Fat Head's brand provided. However, there were some who felt that the brand did not fit with the Portland market, and that this was one of the reasons why the Portland owners ultimately wanted to end the licensing agreement (Korfhage, 2017). The agreement allowed the Portland operator exclusive rights to the name in Oregon, and the opportunity to leverage Fat Head's branding throughout the region.

Many of the beer recipes and brands were also licensed from Ohio, but with flexibility for the local operator to create and innovate their own product as well. Those initial recipes included many proven, successful recipes that were popular with the craft beer community, as evidenced by their ratings on sites like Ratebeer.com. The agreement was strictly a licensing one.

Unlike a franchising agreement, the brand owner did not provide much oversight into production, so the main thing the Portland owners were licensing was the branding and a few recipes. Having established the clientele, the Portland owners evidently felt that the Fat Head's branding had outlived its purpose, not fitting particularly well with the local market. The desire to build out their own branding, having established a stable business, was the incentive for ending the relationship. The termination appears to have been.