The difference between licensing and franchising is, a licensee must be free to sell products or services in addition to those of the licensor, and may not be required to promote or advertise the licensors products. This legal difference forms the basis for what information needs to be included in each type of agreement. Difference between licensing and franchising praxis. Elements of a franchise a franchise has been described as a license on steroids. Both sell intangibles and both earn fees from those sales. If you are looking for ways to expand your successful business, you may be tossing up between using a franchise or licence model. Dec 29, 2014 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. Franchising and factoring definition, examples, diagrams. An agreement between a licensor to a single licensee for a single license. There are very subtle differences between a distributordealer relationship and a franchise relationship, and there are numerous instances where a purported distributordealer has been deemed to be a franchise. In exchange, the licensor receives payments from the licensee. Jan 16, 2017 now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. But it is also important for aspiring entrepreneurs who are interested in purchasing a franchise or licensing a product.
Management contracts involve not just selling a method of doing things as with franchising or licensing but involves actually doing them. The franchise company and management company have much in common. What is the difference and how do you know if franchising vs. There is a world of difference between licensing and franchising but its not always easy to distinguish between them. It really depends on how much control you want to have over your operators. When trying to expand or leverage your successful business to further growth two models that are commonly used are franchising and licensing. Franchising vs licensing difference and comparison diffen.
If the answer is yes, then you have entered into a franchise agreement. Differences between licensing and franchising marketing. What is the difference between a licence and franchise. Another fundamental difference between franchising and licensing is the amount of control a franchisor holds over the franchisee.
Licensing is a broad term that businesses use for contracting. In franchising, the franchisor licenses its intellectual property to the franchisee. What is most important to you as a small business owner. For example, among other differences, as suggested above, federal law is implicated with respect to franchises. Often, the difference between a licence and a franchise comes down to whether. The organization that gives the access is licensor. If you continue browsing the site, you agree to the use of cookies on this website. These licenses are typically nonexclusive so competing companies can serve the same market. Nov 19, 2016 what is the difference between franchising and licensing.
Difference between licensing and franchising praxis legal. In order to understand the difference, it is necessary to understand exactly what a licence and a franchise are. In a typical licensing agreement, the licensor grants the licensee the right to sell goods, apply a brand name or trademark, or use patented technology owned by the licensor, in exchange for payments to the licensor paid by the licensee for use of. 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. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. What are the advantages and disadvantages of owning a franchise. Aug 26, 20 both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper.
The difference between franchising and licensing may 20, 2015 by trembly law leave a comment if you are looking to buy a business, or youve got an existing business that is growing rapidly, youll want to understand the basics of franchising versus licensing. What is the difference between a franchise and a licence. Running a franchise takes some business acumen to make. Gappa president, management 2000 for the past twentyfive years the key concepts of franchising have been under going evolution and transformation. Franchise owners also are required to buy a fixed number of products from the parent company. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Franchising vs licensing differences between franchising. Licensing is an agreement between two parties, a licensor and a licensee. What is the difference between a license and a franchise. Whats the difference between franchising and licensing.
If the franchisee does not meet these requirements, he. Understanding the difference between franchising and licensing is important for business owners looking to expand their operations. 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. Indeed, to be a proper franchisee you are required to use their logo, name, product, and business system. By submitting the enquiry form you are consenting to send your personal information to the selected franchise business. The franchise business will contact you by means of email and or telephone only to the email address and phone number you have provided.
Knowing the differences between franchising and multilevel marketing also called mlm or network marketing is important when youre choosing the best business model for your background, financing and longterm goals. Difference between franchising and licensing difference. Franchising, licensing, contract manufacturing pros and cons. This article explains the key distinctions between a licence agreement and a franchise agreement. Many people confuse a trademark license and a franchise. We have also advised both franchisees and licensees. Licensing and franchising, what is the difference and does. When you franchise your brand or business, you retain an enormous amount of power. Used by businesses across the world, these two models carry their own sets of advantages and shortfalls. 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. In fact, some licensing deals are so close to franchising that they blur the boundary between the two. Many business owners choose to implement a licensing agreement arrangement to expand their business. This definition is rather open and the nature of foreign activities is not specified. First, its important to understand the difference between these two models.
We would like to take a minute to answer a very common question often asked. Each model has its advantages and can offer an effective strategy for expansion. Leonard can help you understand the difference between franchise laws in california and the laws that apply to licensing agreements. Now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. Distinguishing license agreements from franchise arrangements. A license arrangement is primarily composed of 2 elements. Management 2000 has had the good fortune of being in the middle of those developments. The main differences are summarized in the following table. Whether you choose franchising or licensing to expand your business rests completely on your needs and goals as a business owner. Differences between licensing and franchising marketinginsider. 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. 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. What is the different between management contract and. 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.
What is the difference between an agreement and a deed. Whats the difference between a licence and franchise. Difference between licensing and franchising with comparison. Given the prevalence of franchising and the interstate, national, and even international scope of so many franchise networks today, attorneys need to know about potentially applicable federal, state, and foreign franchise laws. A key difference lies in the area of law by which each business type is governed. The information you submit via our enquiry form is shared only with the franchise business that you have selected.
The manager manages the day to day operations of a business, in exchange for agreed upon compensation and benefits. We will now turn to the differences between licensing and franchising. The differences between licensing and franchising free download as pdf file. Aug 12, 2017 key differences between licensing and franchising. A franchise has to meet the set targets set by the franchiser the main company. Difference between licensing and franchising the tasa group. Traditionally a business owner like you wants everybody to operate under. Difference between franchising and licensing compare the.
A licensing agreement is a legal contract between two parties, known as the licensor and the licensee. The advantages and disadvantages of franchising by david e. Jan 05, 2017 licensing and franchising are sometimes used to mean the same thing, but there are differences. Both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper. Many potential business owners are confused between the concepts of a franchise and license a. For a company looking to expand, franchising and licensing are often appealing business models. Licensing is a contractual arrangement in which one firm grants access to its patents, trade secrets or technology to another firm in a foreign country. The organization that obtains the access is the licensee. Jan 28, 2017 how do i know if i am licensing or franchising. The difference between licensing and franchising is that licensing is a legal relationship that is limited in scope and relates only to the use of a trademark or technology, whereas franchising involves a relationship that goes beyond the grant of a license and includes a relationship of control where the underlying business is required to operate in accordance with designated systems and procedures. Franchising on the other hand is often confused with the term licensing. Licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark. But this is not the case, as franchising is totally different to licensing.
Jul 10, 2017 franchising might be right for your business, but it is not your only option. Franchising might be right for your business, but it is not your only option. As a business owner, one has to choose from the two models as to how he wishes to go ahead. 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. On the most basic level, the difference between a franchise and a license is the amount of support you can expect to receive. The court first examined whether the agreement was exempted from the application of the wishart act due to s. Many businesspeople and professionals think that franchising and licensing are the same, but the fact is that they are different. A franchise is the agreement or license between two legally independent parties which gives. The distinction matters because franchising involves a number of formalities. The major difference between franchising and licensing. The differences between franchising and management contract.
Even attorneys who are not experienced in the niche area of franchise law may find it confusing to differentiate between a trademark license and a franchise. 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. Large companies have both the models to offer to a person who wishes to be liked with them. Often we are asked what is the difference between a franchise and a licence. In franchising, the franchisee gets the right to display the same brand logo, trademark, name and image.
In a nutshell, a franchise is a license wherein the licensor controls the licensee and benefits from that cont. At the franchise institute, we encourage people to consider the two options carefully before they. 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 vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models. 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. This is because licensing is not subject to the ftc franchise rule. You supply the business model, and you can define the territory in which any given franchisee can operate. Whats the difference between licensing and franchising. When franchisor sells the complete business format and system of hisher product to the franchisee, it is called pure franchising.
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. As you consider the difference between franchising and licensing, add up the pros and cons of your situation, goals, personality, and products or services. However, some people still think that franchising and licensing are almost the same and have no specific difference. In contrast, a licensing arrangement allows a licensee considerable freedom in the operation of his or her business. 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. Unclear about the differences between licensing and franchising. 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. Apr 09, 2017 what is the difference between a licence and franchise agreement. Licensing vs franchising top 5 best differences with. Licensing refers to an arrangement between licensor and licensee where latter party would acquire the right to use products and goods where the ownership remains with the licensor whereas franchising refers to an arrangement between franchiser and franchisee where the latter will enjoy the ownership of a business on behalf of the franchiser in lieu. What is the difference between franchising and licensing. There are, however, important differences between a licence and franchise agreement that you should understand.
Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. In other words, this type of franchising provides the franchisee with a complete business format including license for a trade name, the product or service to be marketed, the physical plant, methods of operation, a marketing strategy plan, a quality control. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ. 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. You get back to your office, download the program and typically you agree to the terms and conditions for the use of such accounting software a license. Franchising vs licensing top 5 best differences with infographics. International franchising and licensing request pdf researchgate.
What is the difference between licensing and franchising. What is the difference between a licence and franchise agreement. Determining the amount of control you want to have in a business is the key to choosing whether licensing or franchising is the right option for you. One advantage is that licensing costs much lesser in terms of the initial investment and ongoing charges. Whats the difference between producttrade name franchising. This guide discusses some of the differences between a simple license and a franchise. February 9, 2010 min read opinions expressed by entrepreneur contributors are their own. The first and foremost difference between licensing and franchising are that the former is mainly associated with the production and marketing of goods while. The difference between licensing and franchising is that licensing is a legal relationship that is limited in scope and relates only to the use of a trademark or technology, whereas franchising involves a relationship that goes beyond the grant of a license and includes a relationship of control where the underlying business is required to operate in accordance with designated systems and. Below is the top 5 difference between franchising vs licensing. But which model is better franchising vs licensing.
Starting and running a small business can be challenging, so its important to determine what is best for you and your business. May 12, 2010 this guide discusses some of the differences between a simple license and a franchise. The difference between franchising and licensing is that franchising is used for goods whereas licensing is. Both can be a route to successful expansion, as an alternative to organic growth and with less risk. Sep 04, 2014 in a typical licensing agreement, the licensor grants the licensee the right to sell goods, apply a brand name or trademark, or use patented technology owned by the licensor, in exchange for payments to the licensor paid by the licensee for use of.
You also agree to receive further newsletter email marketing from what franchise. A franchise operation is a contractual relationship between the franchisor and franchisee in which the franchisor offers or is obligated to maintain a continuing interest in the business of the franchisee in such areas as knowhow and training. The licensor, who owns a piece of intellectual property, allows the licensee to use this property in exchange for a licensing fee. Its easy to become confused between franchising and licensing because on the surface they sound remarkably similar. Jan 07, 2011 difference between franchising and licensing. The differences between licensing and franchising scribd. The difference between licensing and franchising can be drawn clearly on the following grounds. Licensing and franchising can help you break into new markets that you may not have been able to access otherwise.
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