Licensing and franchising are highly effective ways to monetise IP. They can be used in tandem, provided that effective controls are in place to protect your assets and brand values. Both these approaches can even be combined with running your operations, as the rapid growth of Singapore’s I Can Read programme demonstrates.
When you are planning to expand an offering into new markets and territories, it is not always necessary to create subsidiary companies or offices. You may choose instead to set up a franchise and contract with other people to operate your business model. Alternatively, you may prefer a licensing arrangement, whereby companies are permitted to use your IP in their own business.
I Can Read, an ability-based programme that focuses on teaching students how to acquire reading skills is committed to using both approaches. Executive Director Chan Huang Yee explains,
“We have a three-pronged growth strategy: the learning centre-based model, which could be operated by us or franchised; the curriculum licensing model, where we license our content to international schools, private schools and education ministries, which we feel is a game-changer; and our e-learning platform”.
From its Singapore headquarters, I Can Read has spread out into nine other Asian markets and now has over 140 learning centres in total. It has come a long way from the company’s beginnings in the late 1990s when two Australian educational psychologists started a pilot programme. Huang Yee:
“It was a very successful literacy programme because it produced results—as end-users, we felt that this was a great product—but there wasn’t a lot of focus on how to consolidate the assets and take this wonderful programme to other countries.”
In the past, I Can Read operated using what Huang Yee describes as a “loose” franchising arrangement. Since the company’s founders did not operate any centres, there were few centralised and documented management processes. As a result, the company lacked a truly scalable business model on which to build an international presence.
When I Can Read’s current Singapore-based management team took over in 2012, its priority was to take back control and get the core business working in a streamlined and efficient way. As a result, 21 of 24 Singapore I Can Read centres are now centrally owned, as the company bought out many of the original franchisees in the course of this restructuring.
When it was time to expand internationally, I Can Read made sure it was well prepared.
“Before we started, we hired a consultant to study what we had and to help develop our model—what kind of operations manuals were required, what type of support should be provided, what controls were needed and what things we had to protect.”
Running wholly-owned centres is a capital-intensive approach that is harder to scale. Accordingly, I Can Read determined that it should adopt a hybrid model of owned and franchised centres in key markets and franchised centres in the others.
While franchising can be lucrative, it comes with a range of associated costs which mean it does not suit every context. Today, the company goes through a market-by-market analysis to determine where it should appoint franchisees to set up new centres, and where it should adopt a licensing strategy to make its reading programmes available to existing establishments.
Huang Yee explains:
“If you look at a market like Bangladesh, there is no enrichment or tuition culture, so the centre model will not work. That is an obvious decision—it is a licensing model. However, if you look at a large market like China, after-school learning is huge; parents send their children into private education or enrichment sessions from as young as three years old. It is big enough for centre-based models and licensing opportunities to co-exist. But in a market like Singapore or Hong Kong, we will never do licensing, because we would cannibalise our own market”.
Setting up a licensing arrangement can be as simple as giving another organisation permission to use your IP. However, in I Can Read’s case, the way its programmes are delivered has a big impact on their effectiveness. Accordingly, even with a licence, the company still provides a significant amount of ‘wraparound’ support.
“A typical licensing model will be heavily skewed towards the professional development of teachers. Before we start a licensing project, we will have a needs analysis and determine how our content should be integrated, or whether it is a direct replacement. Then we look at whether the teachers meet a certain minimum standard. The implementation phase will start with training the teachers, to equip them with the right skills and show them how to deliver the programme. The whole process is very different from running a centre.”
Branding is usually front and centre in a successful franchise. As well as being a mark of origin, giving customers confidence that they are getting the genuine article, it acts as a ‘hook’ for the company’s reputation. It is therefore vital for future growth to ensure that franchisees adopt the right branding.
In 2016, recognising that its brand was not being represented consistently, I Can Read hired a branding consultant. It now has a comprehensive set of brand guidelines, covering everything from the correct fonts to use for e-mails, documents and signage, to rules for using the horizontal or vertical stacked logo, and designs for the centre and the reception area—right down to the use of colours and feature walls.
Once a brand is successful and well known, others will inevitably try to copy it. Accordingly, I Can Read pays close attention to brand registration. As Huang Yee explains,
“We apply to register trade marks in all the markets where we operate, and the new markets where we think we will operate in future. Most of these have been approved—we haven’t had any problems with objections, although the speed of registration in some countries (like Indonesia and Thailand) is a bit of a challenge. I finally got my certificate for the 2012 logo from Indonesia just after I had applied to protect the new one in 2016!”
When it comes to ‘copycats’, many Singapore companies assume that China is a difficult market, though in I Can Read’s experience, things have improved a lot over the years. The company has been working to address one issue, namely that other people have already registered a similar brand to its Chinese name because the characters are in fairly common usage.
“We don’t think this is malicious. We have most of our usual classes approved, which gives us quite a lot of protection, and we are looking with a Chinese law firm at another character set that sounds the same, in case we need to change”.
Additionally, in markets where registered copyright protection exists, I Can Read will register its full curriculum.
Operating in a range of very different markets has not only taught I Can Read what works but has also given it a clear sense of how to run a profitable business. The company’s approach follows the usual model, with licensees paying royalties based on turnover, and franchisees additionally bearing some of the costs of set-up.
“When we franchise, there is an upfront payment, and then on-going royalties based on the fees earned, which are periodically reviewed. When we license, we prefer to charge schools based on a fee per student per year. We package it all as one price because schools find it easier to manage.”
I Can Read always has to consider what is do-able commercially in each market.
“There’s no way that we can charge the Singapore pricing in Bangladesh, so we have to find ways to make it work for us. You have to localise the costs, otherwise, you will have no margins. A low-cost market is a volume business: we may not be able to charge Singapore fees per student per year, but we can charge a smaller percentage of those fees because they give you then 100,000 students—so the math will stack up”.
When localising its costs in relation to Bangladesh, the company has gone as far as setting up a local print, warehousing and distribution facility.
“If we were to supply everything from Singapore, one of the biggest costs for us would be freight and printing, and the market is not going to be able to absorb that, so we do it locally in Dhaka.”
Sometimes I Can Read delegates handling distribution, and even sales and marketing, to local partners.
“We then focus on controlling the thing that is really important to us, which is our IP—our content, our core model, the delivery of our training and professional development.”
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