Contact an experienced california franchise, distribution and licensing attorney who has real life experience working with individual entrepreneurs and national franchisors. If you continue browsing the site, you agree to the use of cookies on this website. The difference between licensing and franchising can be drawn clearly on the following grounds. Companies try to move beyondhaving just another product or service,and say they have a brand. Fully revised, completely updated, and still the definitive guide to these great business strategies.
The advantages and disadvantages of franchising by david e. So, even from a business standpoint, the franchising vs. For a company looking to expand, franchising and licensing are often appealing business models. Franchising and licensing are both ways for businesses to leverage their success. Licensing when considering which model will work best for your business you need to consider the nature of your business and what degree of control you need over your ip or brand when it is used by others. Licensing definition and meaning collins english dictionary. Many business owners choose to implement a licensing agreement arrangement to expand their business.
Thus, licensing provides an opportunity to the licensor to spread out its business without actually investing for such expansion just by licensing its intellectual property right to a licensee who would thus be entitled through such licensing contract to use the intellectual property as per the terms and conditions of the contract. Jan 16, 2017 the fundamental difference between franchising and licensing is that in licensing, the small business owner doesnt relinquish as much control over their business as with franchising. Aug 12, 2017 the difference between licensing and franchising can be drawn clearly on the following grounds. Providing effective advice in franchising depends upon accurately assessing the unique relationship between franchisors and franchisees. Licensing are governed by contract law, contract law are basically written agreements associated with exchange of goods and services, money, and properties businessdictionary, n. However, while franchising is a regulated industry and there are startup costs and expenses associated with franchising your business, it is critical that you. It is usually best to follow the rule of thumb for federal licensing, which states if a federal government agency regulates the industry or business, a federal license or permit is needed. 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. Franchising allows a company the franchisor to expand by granting other individuals or companies the franchisee the right to operate a copy of the franchisors brand and business methods in an area for a set period.
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 in the sense of business opportunities. 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. These methods can offer a route to expansion in businesses that are local by nature and so dont lend themselves to. Hello, i have worked as an executive assistant for an insurance restoration company for over 5 years and have bought into a franchise recentally and want to promote my services to. This guide discusses some of the differences between a simple license and a 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. The designations employed in ilo publications, which are in conformity with united nations practice, and the presentation of material. Licensing and franchising franchising license free 30. However, failure to comply with these laws can subject youyour companys principals to liability for damages or rescission. Franchising is a form of licensing in which a companythe. In licensing, another individual is buying the rights to use aspects of another companys branding, products, and trademarks in exchange for a percentage of. Yet, these situations arise with considerable frequency.
The two parties enter into an agreement in which the franchisor licenses to the franchisee the right to market a brand and operate a business in. The major drawback of licensing is the problem of controlling the licensee due to the absence of direct commitment from the international firm granting the licence. This is the easiest way if the licenses are managed manually. Many times, people think licensing is an easier route to franchising. Examples of licensing pharmaceutical firms engage in crosslicensing practices in which they exchange scientific knowledge about producing products and distribution rights.
The fundamental difference between franchising and licensing is that in licensing, the small business owner doesnt relinquish as much control over their business as with franchising. Open source licensing the licence is what determines whether software is open source the licence must be approved by the open source initiative. Use pdfcreator on as many computers as you like anywhere at home, in the office. Well help you address issues at the outset before they become major problems. A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. The plan in the prelicense stage is a list of all projected submissions needed for licensure and a tracking system for their completion. You hear the term brand very frequently in marketing. This is because licensing is not subject to the ftc franchise rule. It also requires sound practical advice to manage the relationship. Franchising licensing buying and selling legalvision. 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. Is a form of licensing in which a companythe franchiseragrees to provide a franchisee a name, logo, methods of operation, advertising, products, and other elements associated with a franchisers business in return for a financial commitment and the agreement to conduct business in accordance with the franchisers standard of operations. Franchising vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models.
In a nutshell, a franchise is a license wherein the licensor controls the licensee and benefits from that cont. Like a licence agreement, a franchise agreement is also a type of contract. While a franchising business may require you to pay royalty every time a profit is made, a licensing opportunity does not demand such an expense. Licensing when considering which model will work best for your business you need to consider the nature of your business and what degree of control you need over your ip or brand when it is. Franchising vs licensing differences between franchising. We represent a full range of franchisors, from startups to national and international franchise systems. Two powerful ways to grow your business in any economy hardcover april, 2011 by andrew sherman author 4. Licensing and franchising abstract every business organisation has its own strategy of survival and growth in the market depending on the kind of business environment it is being operating. Franchising allows another business to replicate your entire company and business model in exchange for fees. More competitive the markets are the more is the burden on these business organisations to ensure that they. Difference between licensing and franchising with comparison.
Contact janet martin today for a free initial consultation at 9494152677 or contact me to schedule an appointment. Developing commercial markets for business development. Licensing and franchising licensing a licensing agreement is an agreement wherein the licensor gives something of value to the licensee in exchange for certain performance and payments. In addition to franchising, there are two other popular methods by which businesses expand their market and distribution channels. Licensing, franchising, other contractual strategies study guide by anfieldcat includes 19 questions covering vocabulary, terms and more. Licensing franchise free download as powerpoint presentation. After few years, once the knowhow is transferred, there is a risk that the foreign firm may begin to act on its own and the international firm may therefore lose that market. Youre buying into a successful, established business with builtin name recognition. The licensing body when they issue a license has a minimal assurance the customers of the one licensed are either protected or assured of a minimally correct product or experience. And its now completely overhauled to reflect important new trends, laws, and strategies. In such a situation, the licensor needs to either a. Our franchising lawyers have a vast depth of skill in representing and advising domestic and international franchisors in all facets of their franchise operations.
Franchising is a type of licensing that goes beyond use of a specific product or branding and encompasses your business model. Licensing and franchising franchising license free. See all 7 formats and editions hide other formats and editions. Under the regulations, the franchisor is required to disclose to the potential franchisee documentation relating to its business, commonly known as franchise offering notice, at least 30 days prior to entering into a franchise agreement.
They do this by allowing other people to use the knowledge, branding, intellectual property or business model that theyve developed. In assessing this you need to consider if someone else using your ip or product in a manner you would not approve would. A licensing arrangement can slip into an unintentional franchising structure if the licensing contracts are drafted poorly or if the licensor inappropriately controls the business operations of the licensee. In addition, many of these laws have provisions for criminal penalties, civil fines and the award of attorneys fees. What is the difference and how do you know if franchising vs. Jul 10, 2017 franchising might be right for your business, but it is not your only option. May 12, 2010 compliance with these laws can be cumbersome and can delay the rollout of your licensing program. Real talk business reboot webinar about how to pivot your business, and stay mentally tough, during a crisis. Create a license agreement to control viewing of pdf files. Join us and fashion entrepreneur rebecca minkoff for an inc. Unlike franchises, in which the franchisor exerts significant control over the franchisees operations, licensors are mainly interested in collecting royalties and supervising the use of the license rather than influencing the operations of. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. Its more than just a logo or customized font or color,but at the end of the day what is a brand.
Unlike a licence agreement, franchise agreements will contain specific directions on how the franchise must operate. Licensing and franchising share a few similar advantages. Those fees generally include a flat amount to join the franchise, along with ongoing royalties. Then there are the financial, bottomline considerations. Licensing and franchising free download as powerpoint presentation. Structuring licenses to avoid the inadvertent franchise. Our franchising lawyers have served as franchise counsel to many emerging and established regional, national and international franchisors in a variety of industries, including. While franchising is a recognized legal terminology, in the sense that it subjects the party offering these services to certain rules and regulations, licensing does not come with these issues, but it is necessary to be careful as licensing can also be considered a franchise from a legal standpoint. Service firms in retailing, fast food, car rentals, television programming, and animation rely on licensing and franchising agreements. 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. Elements of a franchise a franchise has been described as a license on steroids. The license key is installed using the gui tool graphical user interface.
The existing franchising legal framework in mexico is set forth in the industrial property law ipl and the regulations to the ipl. Jun 15, 2007 open source licensing the licence is what determines whether software is open source the licence must be approved by the open source initiative. Pdf determining pros and cons of franchising by using swot. Franchising is an arrangement in which the franchisor permits. Two powerful ways to grow your business in any economy. Canadian industrial hemp northern alberta development council. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Aug 26, 20 thus, licensing provides an opportunity to the licensor to spread out its business without actually investing for such expansion just by licensing its intellectual property right to a licensee who would thus be entitled through such licensing contract to use the intellectual property as per the terms and conditions of the contract. The exact terms of the licenses are detailed in the manual as well. Franchising might be right for your business, but it is not your only option.
However, they enjoy a lot more freedom than franchisees. An international business licensing agreement involves two firms from different countries, with the licensee receiving the rights or resources to manufacture in the foreign country. Licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark. Also, once the licensee is able to successfully set up its business and spin off on its own, the relationship between licensee and the parent company is restricted to the frequent purchase of products. For example, paying a sum of money with signage of return agreements black and white, in return getting license to a company. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Licensing arrangements are governed by standard contract law so there are less administrative burdens than in a franchising arrangement. Franchising is a business model where you the franchisor grant to another person the franchisee the right to market your brand and provide your particular goods or services in the way you require. Certainly no licensor expected to end up defending franchise allegations. Why do people work so hard to build and protect brands.
Licensing gives a licensee certain rights or resources to manufacture andor market a certain product in a host country. What is the difference between licensing and franchising. Licensees also enjoy lowered risk because theyre usually entering the marketplace with a known quantity and a builtin customer base. Franchising vs licensing difference and comparison diffen. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed. Franchising is a popular way to start a business because its much less risky than creating a business from scratch. The broad scope of the franchise laws may apply to a. What is the difference between franchising, distribution, ag. In this tutorial, learn how to create a license agreement that can be added to a pdf document viewed in all acrobat viewers. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a licensor. Maas pros, headquartered in markham, canada has been assisting businesses in implementing profitable and measurable digital marketing solutions in the areas of websit. Licensing is a business agreement involving two companies. Used by businesses across the world, these two models carry their own sets of advantages and shortfalls.
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