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