Difference between franchising and licensing pdf

There is a world of difference between licensing and franchising but its not always easy to distinguish between them. The difference between licensing and franchising can be drawn clearly on the following grounds. Both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper. The difference between franchising and licensing is that franchising is used for goods whereas licensing. In fact, some licensing deals are so close to franchising that they blur the boundary between the two.

International franchising advantages and disadvantages. Whats the difference between franchising and licensing. Mcdonalds is one of the best known examples of a business that has grown through franchising. Franchising and factoring definition, examples, diagrams. Franchising on the other hand is often confused with the term licensing. What is the difference between licensing and franchising. The major difference between franchising and licensing. 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. The latest in franchising sent free to your inbox the information you submit via our enquiry form is shared only with the franchise business that you have selected. The term franchising is used to describe a wide variety of business systems which may or may not fall into the legal definition provided above.

Leonard can help you understand the difference between franchise laws in california and the laws that apply to licensing agreements. 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. The manager manages the day to day operations of a business, in exchange for agreed upon compensation and benefits. When franchisor sells the complete business format and system of hisher product to the franchisee, it is called pure franchising. Internal and external growth strategies explained with. Franchising vs licensing difference and comparison diffen. Difference between licensing and franchising praxis. When a business is being offered as a license agreement, money is made by a onetime fee that is paid to you maybe renewed once a year.

This article explains the key distinctions between. For a company looking to expand, franchising and licensing are often appealing business models. The hallmark of a franchise is the nature and extent of the control that a franchisor exerts over the operation of a franchisees business. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. What is the difference between franchising and licensing.

However, while franchising is a regulated industry and there are startup costs and expenses associated with franchising. Licensing vs franchising top 5 best differences with. Unclear about the differences between licensing and franchising. These two terms are often confused with one another. It involves finding franchisees with the skills necessary to operate branches of the same business. February 9, 2010 min read opinions expressed by entrepreneur contributors are their own. 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.

Many people confuse a trademark license and a franchise. Licensing and franchising, what is the difference and does. Franchising and licensing are means of expanding a business. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ. In case of freedom, a licensee has more freedom with regard to the business. What is the difference between a licence and franchise agreement. Where licensing is just a simple agreement or contract between the licensee and the licenser, franchising involves securities law and other legal formalities. 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. For example, among other differences, as suggested above. Traditionally, licensing is limited to a someone granting a license. Franchising is a way to scale a business once it is successful and proven.

Even attorneys who are not experienced in the niche area of franchise law may find it confusing to differentiate between. In exchange, the franchisee puts up the initial capital for the business, helps to promote the brand and pays a licence fee. During the process of international franchising, companies often strive to replicate successful domestic business models in foreign markets. Franchise owners also are required to buy a fixed number of products. By contrast, starbucks has grown by opening its own branches.

Differences in language, laws and financial systems, between franchising. 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. 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 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. Licensing vs franchising top 5 best differences with infographics. Read this article to learn about the meaning, features, merits and limitations of franchise. We would like to take a minute to answer a very common question often asked. We will now turn to the differences between licensing and franchising. To understand the difference between licensing and franchising the starting point is to look at what each term means. This license allows a thirdparty licensee the right to use the licensee s trademarks.

When you want to go into business, franchises offer help in getting started and creating an immediate income. Large companies have both the models to offer to a person who wishes to be liked with them. Differences between licensing and franchising marketing. Difference between licensing and franchising with comparison. In a true license arrangement, a licensor is limited in the amount of initial and ongoing assistance it can provide to a licensee. An introduction to licensing bioeconomy corporation. The main differences most agreed on can be found here. Many times, people think licensing is an easier route to 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.

Now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. On the most basic level, the difference between a franchise and a license is the amount of support you can expect to receive. Its easy to become confused between franchising and licensing because on the surface they sound remarkably similar. 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, franchising and licensing come from two distinct areas. When you delve deeper, youll notice there are many key differences between the. Whats the difference between a licence and franchise. We have also advised both franchisees and licensees. Both concepts are ways in which the firm can establish business in other markets and therefore entry modes. The first and foremost difference between licensing and franchising are that the former is mainly associated with the production and marketing. If you like having many elements of your business preplanned for you, head in the franchise direction. What is the difference between a licence and franchise. Before turning to the differences between licensing and franchising, we should take a closer look at the definitions of the two concepts.

With a franchising or licensing agreement, you can recruit other entrepreneurs to help. Though both share similar advantages, licensing can be called a subset of franchising. What is the difference between a franchise and a licence. Mcdonalds restaurants and subway are examples of franchising. Indeed, to be a proper franchisee you are required to use their logo, name, product, and business system. On the other hand, a joint venture with a partner you trust can work.

From a legal standpoint, franchising can be described as a super license where the franchisor grants the franchisee the license and right to use the franchisors trademarks and systems. A comprehensive difference is shown in the following table. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Often we are asked what is the difference between a franchise and a licence. 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. What is the different between management contract and. This guide discusses some of the differences between a simple license and a franchise. When you franchise, you authorize someone else to open a store or.

There are, however, important differences between a licence and franchise agreement that you should understand. 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. 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. Licensing is a similar kind of contractual alliance, allowing partners to use intellectual property, such as patents or brands, in. But this is not the case, as franchising is totally different to licensing. If you are a business owner, you may want to license the use of your brand or. Knowing the differences between franchising and multilevel marketing also called mlm or network marketing is important when youre choosing the best.

What is the difference between a license and a franchise. 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. A licensing or licence agreement is basically a legally binding contract between a licensor. Whether you choose franchising or licensing to expand your business rests completely on your needs and goals as a business owner. A franchise has to meet the set targets set by the franchiser the main company. Elements of a franchise a franchise has been described as a license on steroids. But which model is better franchising vs licensing. Both can be a route to successful expansion, as an alternative to organic growth and with less risk. As you consider the difference between franchising and licensing. However, some people still think that franchising and licensing are almost the same and have no specific difference.