Royalty & licensing glossary.
Plain-language definitions of the terms apparel finance and licensing teams use every period — from royalty rate to recompute history.
Royalty rate
The percentage or per-unit fee a licensee pays a licensor on licensed product sales.
Royalty amount
The calculated payment owed to a licensor for a given period.
Gross sales
Total revenue from licensed product sales before any deductions.
Net sales
Gross sales minus contractual deductions — typically what the royalty rate applies to.
Deductions
Contractual reductions to gross sales before the royalty rate applies.
Minimum guarantee (MG)
A contractual floor — the minimum royalty a licensee owes regardless of actual sales.
Royalty advance
An upfront payment from licensee to licensor against future earned royalties.
Recoupment
The process of amortizing an advance against earned royalties.
Earn-out
The point at which earned royalties exceed the advance balance — new royalties become payable.
Cross-Collateralization
A contract mechanism that lets a licensor recoup advances or minimum guarantees across multiple properties, agreements, or contract years.
Returns reserve
A holdback against expected returns, often netted from current-period royalty payments.
Returns
Licensed products returned by customers — typically deductible from royalty-bearing sales.
Returns lag
The time delay between original sale and return posting — critical for accurate royalty true-ups.
True-up
Adjustment to a prior period's royalty after the original calculation, typically for returns or rate changes.
Royalty statement
The periodic remittance document showing royalties owed for a reporting period.
Net due
The final royalty payment owed to the licensor after all adjustments.
Licensor
The party granting rights to use marks or properties — the entity owed royalties.
Licensee
The party paying royalties for the right to use a licensor's marks.
Licensing agreement
The contract between licensor and licensee establishing rates, terms, and reporting requirements.
Reporting period
The cycle (monthly, quarterly) over which royalties are calculated and reported.
Audit clause
Contract terms allowing the licensor to audit the licensee's royalty calculations.
Royalty audit
A licensor-initiated review of the licensee's royalty calculations and supporting data.
Audit trail
Immutable record of every change to a royalty calculation — original rate, recompute history, statement versions.
Recompute history
The historical record of how a royalty calculation has changed over time.
Stale-master drift
When a contract or rate change in one spreadsheet fails to propagate to dependent workbooks.
Rate card
The structured per-licensor (or per-agreement) royalty rate schedule.
Cooperative mark
A product mark involving rights from multiple licensors — royalty splits across both.
Mark type
The classification of trademark on a licensed product — team, league, event, player, etc.
Sales channel
The retail channel through which a licensed product reaches the consumer.
SOX controls (for royalty)
Internal-control requirements that publicly-traded apparel licensees must meet for royalty workflows.
Royalty cap
An upper limit on royalties payable for a period or contract term, set by agreement.
Audit lookback period
The historical window an audit clause permits a licensor to examine — the ceiling on recoverable exposure.
Sell-off period
The post-termination window in which a licensee may sell remaining licensed inventory, with royalties still reportable.
Contract currency
The currency a licensing agreement denominates the royalty obligation in — often not the currency the sales settled in.
Territory
The geographic scope in which a licence grants rights — a separate field from the currency a sale settles in.
Gratis units
Licensed units distributed without charge — samples, promotional, seeding, employee — often capped or reportable at a deemed value.
Want to see how these terms work in the platform?
Walk through royalty calculation, statement generation, advance recoupment, and audit trail with our team.