Franchising vs licensing the best business model for brand growth. You hear the term brand very frequently in marketing. This topic may spark some debate because, in the end, it really depends upon what you want out of the relationship. Difference between franchising and licensing compare the. Franchising and licensing are terms which describe very similar relationships but with stark differences. It is really a great feeling to be changing over from an employee to an owner. But which model is better franchising vs licensing. In laymans terms, this means that if a business wishes to expand through franchising, it must register in the appropriate jurisdictions and also incorporate. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Licensing does not require registration, whereas registration is a must in the case of franchising. We will now turn to the differences between licensing and franchising. Is your licence or distribution arrangement really a franchise.
Structuring licenses to avoid the inadvertent franchise by rochelle spandorf or any type of monthly fee based on gross receipts for the distribution or licensing rights. Indeed, to be a proper franchisee you are required to use their logo, name, product, and business system. Franchising is a business strategy in which franchiser owner, affiliate with franchisees dealers for distribution, business expansion and marketing. Even if you dont control most aspects of the franchisees business, if you suggest most of the above, then you are likely franchising rather than licensing your business. Franchising is based on securities law while licensing falls under the purview of contract law. Its more than just a logo or customized font or color,but at the end of the day what is a brand.
But it is also important for aspiring entrepreneurs who are interested in purchasing a franchise or licensing a. However, some people still think that franchising and licensing are almost the same and have no specific difference. Licensing is an agreement between licensor and licensee wherein one organization gives the other organization access to its patents, trade secrets, or technology for a fee known as royalty. If you are a business owner, you may want to license the use of your brand or products to another business in order to gain more exposure for your company and earn revenue on the side. Franchising might be right for your business, but it is not your only option.
Presentations ppt, key, pdf logging in or signing up. What is the difference between a licence and franchise agreement. Here is a quick look at the differences between licensing and franchising to provide a starting point in determining which option is best for your business. Which is the best mode for business available at my assignment services and also get the perfect solution for your problems. Licensing vs franchising self help learning notes edurev. You get back to your office, download the program and typically you agree to the terms. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Franchising vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models. There are many opportunities for people who want to explore careers and business. In exchange for these rights and services, the franchisor receives an upfront fee for the rights to a geographic area, as well as royalties based on sales. Aug 07, 2015 robert kiyosaki 2019 the speech that broke the internet keep them poor.
Jul 10, 2017 franchising might be right for your business, but it is not your only option. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. This webinar discusses in detail the various alternatives to franchising, their relative strengths and weaknesses, and their legal requirements. Whats the difference between licensing and franchising. Companies try to move beyondhaving just another product or service,and say they have a brand. For a company looking to expand, franchising and licensing are often appealing business models. Franchising is a faster, cheaper form of expansion than adding companyowned stores, because it costs the parent company much less when new stores are owned and operated by a third party. In general, a franchise is a business form where you pay a fee to the franchisors allowing you, the franchisee, to use their business logo, name, product, and business system. Unclear about the differences between licensing and franchising. Why do people work so hard to build and protect brands. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ.
Franchising vs licensing differences between franchising. Licensing even though from the looks of it, a licensing opportunity seems to be less advantageous as compared to a franchising business, licensing has its advantages as well. Franchise marketing systems helps you understand the best business model for brand growth by explaining franchising vs licensing as a small. Cost when you license a business, there are no franchise fees, marketing fees or royalties. When you are ready to expand, you may investigate both licensing and franchising as possible directions for business growth, but it can get confusing as to how these options differ. On the most basic level, the difference between a franchise and a license is the amount of support you can expect to receive. Nov 19, 2016 licensing vs franchising, extra questions, previous year questions with solutions, semester notes, study material, free, tax vs gift, dt vs idt, objective type questions, mock tests for examination, mean vs median vs mode math, class 9, summary, pdf, viva questions, licensing vs franchising, sample paper, apple a12 vs snapdragon vs exynos vs. Agenda licensing what is a license agreement licensor vs licensee licensing pros and cons top 5 licensors franchising. While franchising is perhaps the worlds most powerful growth vehicle, the entrepreneur considering growth options would be. Licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark. Whats the difference between franchising and licensing. Under the federal trade commissions disclosure requirements and prohibitions concerning franchising and business opportunity ventures, code of federal regulations, title 26, chapter 1, subchapter d, part 36, better known as the ftc franchise rule, anyone who offers, sells or distributes goods. Feb 01, 2004 a restaurateur ponders taking the leap into franchising. Although there are pros and cons to growing your business through either licensing or franchising, your business may be better suited for one route over the other.
The hallmark of a franchise is the nature and extent of the control that a franchisor exerts over the operation of a franchisees business. Posted on july 10, 2017 january 15, 2020 by operations. What is most important to you as a small business owner. Now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. A powerful tool the difference between franchise fee and total investment. You get back to your office, download the program and typically you agree to the terms and.
Risks of becoming an accidental franchisor if a licence agreement is actually a franchise agreement, then the franchising code of conduct will apply. Difference between licensing and franchising praxis. Aug 12, 2017 key differences between licensing and franchising. The idea was to introduce young people to franchising, to the many facets of the franchising business, and to the many opportunities that franchising offers for both employment and professional careers and for business opportunities and business ownership. A franchise is a license issued to someone to operate a business using a common brand name, a common operating support system and. In exchange, the licensor receives payments from the licensee. Its also not limited to manufacturingfranchising is also a form of technology licensing.
Many business owners choose to implement a licensing agreement arrangement to expand their business. Compare licensing vs franchising a business costs franchising a business overview franchising is a popular way to start a business because its much less risky than creating a business from scratch. The difference between licensing and franchising can be drawn clearly on the following grounds. If you buy a franchise, you get all the advantages of remaining selfemployed, but you mitigate the risks by being part of a proven business that typically has a customer base ready and waiting. Difference between licensing and franchising with comparison. The broad scope of the franchise laws may apply to a. Whats the difference between a licence and franchise. In a franchising model, the franchisee uses another firms successful business model and brand name to operate what is effectively an independent branch of the company.
Maas pros, headquartered in markham, canada has been assisting businesses in implementing profitable and measurable digital marketing solutions in the areas of websit. Support franchise business plans how to write a franchise operations manual. The organization that gives the access is licensor. International franchising and licensing enables companies to efficiently leverage their most valuable asset, their brand and associated intellectual property encompassing trademarks, patents, knowhow, and business and marketing systems in return for royalties andor products sales. To franchise, or not to franchise, franchising and licensing. Franchising would only work, kennedy decided, if the relationship between headquarters and franchisee was a true partnership, rather than the usual fiefdom. In franchising, complete training and support are provided by the franchisor to franchisee which is absent in licensing. Licensing or franchising linkedin learning, formerly. These may include national marketing, accounting, pointofsales information, site selection, and site acquisition. We get this question often and it is critical to understand the differences. But this is not the case, as franchising is totally different to licensing.
Understanding the difference between franchising and licensing is important for. Both can be a route to successful expansion, as an alternative to organic growth and with less risk. Business format franchising accounts for most of the explosive growth in franchising that has occurred in the past five decades. A license arrangement is primarily composed of 2 elements. In contrast, a licensing arrangement allows a licensee considerable freedom in the operation of. What is the difference between licensing and franchising.
Brouthers and others published international franchising and licensing find, read and cite all the research you need on. When you delve deeper, youll notice there are many key differences between the two, than can impact the manner in which your brand is used and how much control you have over it. Let us study much more about franchising vs licensing in detail. Licensing is an arrangement in which a company licensor sells the right to use intellectual property, or produce a companys product to the licensee, for a negotiated fee i. Franchising vs licensing difference and comparison diffen.
Scores of franchising concepts are converted into profitable businesses each year, most of them created in the united states. In laymans terms, this means that if a business wishes to expand through franchising, it must register in the appropriate jurisdictions and also incorporate certain information into its franchise agreement. This allows the small guy access to a successfully established product with a 30 year track record. International franchising and licensing request pdf researchgate. Introduction to franchising small business administration. Dec 15, 2014 difference between licensing and franchising the hallmark of a franchise is the nature and extent of the control that a franchisor exerts over the operation of a franchisees business. In a franchising model, the franchisee uses another firms successful business model and brand name to operate what is effectively an independent branch of the. Licensing vs franchising, extra questions, previous year questions with solutions, semester notes, study material, free, tax vs gift, dt vs idt, objective type questions, mock tests for examination, mean vs median vs mode math, class 9, summary, pdf, viva questions, licensing vs franchising, sample paper, apple a12 vs snapdragon vs exynos vs.
Click here to request our free onehour webinar, alternatives to franchising. Youll pay an upfront fee to purchase the license, but recurring costs will be. On the flip side, potential for revenue growth is more limited because the parent. The main differences are summarized in the following table. Franchising vs licensing top 5 best differences with infographics. Used by businesses across the world, these two models carry their own sets of advantages and shortfalls. You may also gain a monopoly within a particular territory, and your initial investment may be. Differences between licensing and franchising marketinginsider. No investor paid cash to the licensor up front structuring licenses to avoid the inadvertent franchise by rochelle spandorf. Franchising vs licensing which is right for my business.
International franchising and licensing franchisechat. Robert kiyosaki 2019 the speech that broke the internet keep them poor. You can download the franchise expansion guide or take our quick business model. For a company looking to expand or a budding entrepreneur planning a startup, taking on a franchise or negotiating a licence on an existing product or service are currently two of the most popular ways.
The obvious advantages of licensing over franchising include reduced legal costs, reduced accounting and auditing costs, no registration and approval of the license program with any state, and quicker entry into the marketplace. These licenses are typically nonexclusive so competing companies can serve the same market. But if you are starting a small business that is dependent upon selling products of a big company, there are two ways you can do it. Many equate franchising with the wellknown and recognized quickservice. This is a question that a lot of business owners and aspiring entrepreneurs ask themselves as they try to figure out which business model may be best for them. Certainly no licensor expected to end up defending franchise allegations. Franchising vs licensing compare contrast business model. Jan 16, 2017 now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. Yet, these situations arise with considerable frequency. Difference between licensing and franchising praxis legal.
Structuring licenses to avoid the inadvertent franchise. In contrast, a licensing arrangement allows a licensee considerable freedom in the operation of his or her business. What is the difference between franchising and licensing. Franchising is a form of licensing whereby a parent company, the. The major difference between franchising and licensing. In none of these cases did the parties intend to form a franchise relationship. The difference between licensing and franchising is that licensing is a legal relationship that is limited in scope and relates only to the. Starting and running a small business can be challenging, so its important to determine what is best for you and your business. The organization that obtains the access is the licensee. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed.
Difference between franchising and licensing difference. Join doug ladd for an indepth discussion in this video, licensing or franchising, part of marketing foundations. A franchise is a license, though you usually dont find someone so focused on language minutia that they make a big deal out of the distinction. However, licensing a business is generally far less expensive than buying a franchise. Its easy to become confused between franchising and licensing because on the surface they sound remarkably similar. If you continue browsing the site, you agree to the use of cookies on this website. While they may mistakenly be used interchangeably they are two distinct concepts and this article will discuss their differences to assist you in deciding between franchising vs. When it comes to licensing agreements, the licensor gives the licensee the rights to sell goods, use patented technology, or use a brand name or trademark. The advantages and disadvantages of franchising by david e. One advantage is that licensing costs much lesser in terms of the initial investment and ongoing charges. At the franchise institute, we encourage people to consider the two options carefully before they.
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