The taker takes the risk and invests in product production handling facilities and management facilities for other members of the supply chain in order to deliver the product and even sell it to the end consumer. The licensee usually receives a fee for each unit produced and sold. Because the licensee has little investment, this method is seen as an easier way to become an international or global company. One of the most important elements of a licensing agreement is the financial agreement. Payments made by the licensee to the licensee are usually made in the form of guaranteed minimum payments and royalties for sales. Royalties are generally between 6 and 10 per cent, depending on the ownership and the degree of experience and sophistication of the licensee. Not all licensees need guarantees, although some experts recommend that licensees receive as much compensation in advance as possible. In some cases, licensees use warranties as the basis for renewing a licence agreement. If the taker completes the minimum sales figures, the contract is renewed; Otherwise, the licensee has the option of terminating this relationship. Licensing conditions determine what the user can do with the product. The license contains prohibited uses of the product, possible modification rights and possible terms of termination of the contract. The product`s transmission and sub-licensing rights are also mentioned.
In addition, a user often has to accept warranty terms, support services and limitations on the licensee`s liability.