When Al Stofan, co-owner of Pinnacle Manufacturing, pitched agents at Hasbro Inc. about a plan to reproduce the toymaker's board games on his company's products, Stofan got the standard response-send 30 samples for evaluation.
No problem for a company planning to reproduce the image on a T-shirt or ball cap. But for Pinnacle the request bordered on excessive. Stofan's Twinsburg-based company wanted to incorporate the image into custom designed table tops.
"I gave the rep a call back and asked him whose office I'd be cluttering up with 30 tables," says Stofan. "There was a moment of silence before the guy said, 'Um, just send one.' They were used to dealing with smaller, more conventional items."
In September 1997, Hasbro gave the go-ahead to begin prototype development. Pinnacle's owners-Stofan, Lowell Loftin, Loren Rush and Barry Szczepanski-began negotiating licensing agreement terms. In June 1998, Pinnacle received final approval and a license to reproduce four game images: Monopoly, Chutes and Ladders, Scrabble and Candyland. Sales of the custom game table tops began immediately.
Although Pinnacle's experience with Hasbro was unique, the licensing process the company underwent can be boiled down to five basic steps.
Creating the idea
In January 1997, Stofan and Loftin merged their company, Expo Signs-Display Co., with Rush and Szczepanski's firm, the Top Shop Inc., a kitchen counter top maker. The result-Pinnacle Manufacturing-combined Expo's design expertise with Top Shop's products.
That, says Stofan, allowed them to produce custom laminates for re-sale as table tops. "We saw we had this ability and asked ourselves: 'What do we do with it?'" he says. "We knew we wanted to generate repeat business, but we needed a product. So we said: 'Why not games?'"
The first game boards Pinnacle produced were backgammon and chess-two games that didn't require a license to make and sell. Responses from Pinnacle's customers and the laminate manufacturers was so positive, says Stofan, that they decided to contact a game manufacturer and pursue a licensing agreement to make an entire line of full-size table top games.
When Stofan contacted Hasbro about a potential licensing agreement they mailed him an application which Stofan says resembled "a mountain of paperwork."
"Licensing authorities," he says, "ask for the same information-trade references, annual sales, marketing plans, advertising budgets. Everything and anything about your company or that you'll use to sell your product with their image."
But Hasbro's application didn't have a category for Pinnacle's table top idea. That spurred Stofan's call to Hasbro to explain exactly what Pinnacle wanted to produce and to ask someone in authority whether the idea was worth pursuing. Explains Stofan: "Once you get past the gatekeepers, it becomes easier. Then you can find someone to talk with about specific licensing issues for licensing unique products.
"It becomes a one-on-one presentation where they'll sit and listen, and if they like the idea, will help with the process. Hasbro was easy to deal with. They looked at our situation as a separate entity, and even created a new category-finished tables."
Once Pinnacle began working on the prototypes, Hasbro pretty much left them alone to develop it. Says Stofan, "They left the details of the size to us-a 30-(inch) by 30-(inch) standard table top. But each game image had to be approved by Hasbro-the colors, lightness, darkness, hues. That's what took the most time."
And, as they worked to create a prototype both sides considered acceptable, Pinnacle and Hasbro negotiated the terms of the licensing agreement-which would turn out to be drastically different from the terms which first appeared in Hasbro's standard contract.
Hasbro's standard contract terms called for a $25,000 royalty fee for each game image license. "We didn't sign that one," says Stofan. "It was a little more than we could have afforded to do, and this wasn't a retail idea."
That was mainly because Pinnacle doesn't sell its products directly to the public. It works through distributors and wholesalers-builders, kitchen and bath houses and remodelers.
It took a few months before the two sides finally agreed upon a royalty fee of $5,000 per license-or $20,000 for the four games Pinnacle wanted to reproduce. That money was required up front, before Pinnacle could sell its first Monopoly table top. Says Stofan, "They figure they're making a commitment to you, so you should make one to them. The upside about it is that once you pay that fee, every item you sell afterward becomes a profit maker."
Even though they agreed upon price and on the final images, Hasbro insisted on one final stipulation. Because Pinnacle's table tops would be sold with all the same game pieces that Hasbro's board games included, Pinnacle would be enjoined from selling its table tops through the same channels that Hasbro used.
"They felt it would hurt the sale of their games if we competed directly with them," says Stofan. "So we began setting up representative networks." In addition, Pinnacle started direct sales of the game board table tops over the Internet. "We're trying to create a new market," he says.
Meanwhile, Pinnacle has taken its Hasbro experience and built upon its success. Explains Stofan, "Once you get past the first licensing application process, the rest become easier. We can apply any image to these tables so we're looking at other markets we can produce these for."
Pinnacle is currently awaiting final approval from Major League Baseball for a license to reproduce the Cleveland Indians logo on table tops. Also in the works is a license to reproduce more than 160 college logos from the Collegiate Licensing Co.
But the next big idea, says company president Lowell Loftin, is to pursue a licensing agreement from Budweiser to reproduce Louie the Lizard-the irreverent, chatty reptile from TV commercials-for use in restaurants and bars.
"This is the one that will kick it into high gear," says Loftin.
Adds Stofan: "Just imagine four guys sitting at a Budweiser table in a bar saying, 'Hmmm, I guess I'll have a Bud.' What better promotional item could a beer company use?"