DECA Sports and Entertainment Marketing Practice Exam

What is an agreement that allows one company to use another's brand name or intellectual property for compensation?

1. Sponsorship

2. Licensing

3. Franchising

4. Merchandising

The correct answer is: Licensing

The correct answer is licensing because it specifically refers to an arrangement where one company, known as the licensee, receives permission from another company, the licensor, to use its brand name, trademarks, or other intellectual property in exchange for compensation, typically in the form of royalties. This arrangement allows the licensee to benefit from the established reputation and recognition of the brand without having to invest in developing a new brand identity from scratch. Sponsorship, while it involves a company offering financial or material support to another entity in exchange for brand exposure, does not include the direct use of intellectual property in the same manner as licensing. Franchising is a broader concept that includes licensing the use of a brand along with business models and operational support, focusing on a more extensive relationship between the parties involved. Merchandising refers to the creation and sale of goods bearing a brand's name or image and typically does not imply a formal agreement for the use of intellectual property similar to licensing.