In licensing, there is a onetime transfer of property or rights, but in franchising involves the ongoing assistance of franchiser. 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. Conversely, standard fee structure exists in franchising. Advantages and disadvantages 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. Our web page licensing or franchising outlines the difference between licensing and franchising. Whats the difference between licensing and franchising. Licensing gives the licensee a right to operate in cooperation with a brand, gaining access to the brands intellectual property, brand, design, and business programs. You should refer to that page for a definition and application of the terms. If you believe that it is critical for each units success as.
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. Therefore, franchising is characterized by the franchisors transfer of the system specific brand name to the local franchisees and the franchisors significant control. Many times, people think licensing is an easier route to franchising. Licensing, on the other hand, allows a licensee to pay for. Another fundamental difference between franchising and licensing is the amount of control a franchisor holds over the franchisee. Franchising vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models. In exchange, the licensee pays royalty fees to the licensor.
What is the difference between licensing and franchising. Franchising provides both a legal and institutional structure allowing detailed control over the individual units marketing and operational programs. Franchising allows another business to replicate your entire. Licensing and franchising free download as powerpoint presentation. Statistics show that licensing activity is at an alltime high. 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. In product trade name franchising, a franchisor owns the right to the name or trademark. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps with things like branding and marketing support that aid the franchise. However, licensing a business is generally far less expensive than buying a franchise. In laymans terms, this means that if a business wishes to expand through franchising, it must register in the. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Licensing and franchising, what is the difference and does it.
A franchise is the agreement or license between two legally independent parties which gives. The pros and cons of licensing technology mayer brown. Difference between franchising and licensing compare the. A license arrangement is primarily composed of 2 elements. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a. Licensors and franchisors have different roles when it comes to license agreement vs. Under a franchise, the owner franchisor retains control of the brand and licenses that is, grants permissions to the franchisee to use its.
Franchising is based on securities law while licensing falls under the purview of contract law. For a company looking to expand, franchising and licensing are often appealing business models. Difference between licensing and franchising praxis. After having clarified what these two concepts actually mean, one can also. Licensing and franchising franchising license free. Licensing is a broad term that businesses use for contracting purposes. Though both share similar advantages, licensing can be called a subset of franchising.
Should i franchise or license my business 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. To franchise, or not to franchise, franchising and. Therefore, franchising is characterized by the franchisors transfer of the systemspecific brand name to the local franchisees and the franchisors significant control. Federal and state exemption laws first, a bit of history. 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. This article will explore different growth strategies with a particular emphasis on. Difference between franchising and licensing difference. Licensing arrangements are governed by standard contract law so there are less administrative burdens than in a franchising arrangement. Differences between licensing and franchising marketing. As a marketer you try to build your brandso that your customers will know how toevaluate the intangible parts of your service. Here we discuss the top difference between licensing and franchising along with. Franchising vs licensing difference and comparison diffen. Franchising vs licensing compare contrast business model. Background and history of exemption based franchising 1.
Maas pros, headquartered in markham, canada has been assisting businesses in implementing profitable and measurable digital marketing solutions in the areas of websit. The first law, rule or regulation specific to franchising was enacted in 1970, with the. Like a licence agreement, a franchise agreement is also a type of contract. Click here to request our free onehour webinar, alternatives to franchising. Should i franchise or license my business the franchise. International franchising and licensing request pdf researchgate. 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.
This written contract is called a license agreement. A substantial measure of fee negotiation is there in licensing. The five major ways of entering a foreign market are exporting, licensing, franchising, forming joint ventures or establishing a wholly owned. On the most basic level, the difference between a franchise and a license is the amount of support you can expect to receive. This webinar discusses in detail the various alternatives to franchising, their relative. Franchising is a type of licensing that goes beyond use of a specific product or branding and encompasses your business model. Used by businesses across the world, these two models carry. The first and foremost difference between licensing and franchising is that the former is mainly. Licensing vs franchising top 5 best differences with infographics. The broad scope of the franchise laws may apply to a distributorship or license relationship resulting in an unwitting breach by a business owner of federal or state franchise and business opportunity laws. In a franchising model, the franchisee uses another firms successful business model and brand name to operate what is effectively an independent branch of. We will now turn to the differences between licensing and franchising. 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 of a fee where the processes are closely controlled by franchisor therefore it is generally seen that licensing is for products and goods whereas. 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.