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 and licensing are means of expanding a business. It is a marketing system for creating an image in the minds of current and future customers about how the companys products. 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. 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. Success is not guaranteed simply because you are using a business plan that worked for someone else. 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. Franchising and factoring definition, examples, diagrams. Certainly no licensor expected to end up defending franchise allegations. Download pdf successful franchising book full free. Two powerful ways to grow your business in any economy pdf, epub, docx and torrent then this site is not for you. For one thing, franchisees have to abide by company rules and the terms of their licensing agreements, so if you love to be independent, opening a franchise might not be your best bet. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Pdf successful franchising download full pdf book download.
The definitive resource for corporations in myriad industriesunow completely revised and updated. Franchising and the impact, page 4 had corporate stores that they wished to sell, they may offer them to an existing franchisee as a joint venture. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps. As an experienced corporate and transaction lawyer, author andrew sherman offers insider insights into unique opportunities for business growthspecifically, leveraging your intellectual capital through franchising and licensing. These two terms are often confused with one another. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Let us study much more about franchising vs licensing in detail. It involves finding franchisees with the skills necessary to operate branches of the same business. Find out more about the pros and cons of franchising below. The broad scope of the franchise laws may apply to a. The idea was to introduce young people to franchising, to the many facets of the franchising business, and to the many opportunities that franchising offers for both employment and professional careers and for business opportunities and business ownership. Global franchising and development in emerging and. 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.
A multimillionaire who built action international up from a homebased operation to the 16th fastest growing. Franchising is a business strategy for getting and keeping customers. These may include national marketing, accounting, pointofsales information, site selection, and site acquisition. Licensing and franchising, what is the difference and does it. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. Jan 27, 2018 pdf lecture given for graduate students for the course merc 6541 marketing management. Franchising is a form of licensing in which one firm the franchisor contracts with another the franchisee to operate a business. Difference between licensing and franchising with comparison.
This article discusses a framework to assess the potential economic and social benefits and costs of international franchising. Successful franchising available for download and read online in other formats. If that occurs, the licensor needs to immediately comply with franchise laws or readjust the operations to avoid franchise laws. Licensing refers to an arrangement between licensor and licensee where latter party would acquire the right to use. Aug 12, 2017 key differences between licensing and franchising. Brief overview of franchising and licensing relationships. Franchising is a form of business by which the owner franchisor of a product, service or method obtains distribution through affiliated dealers franchisees. Franchising is an arrangement in which the franchisor permits. Pdf licensing intellectual property is chapter 1 of.
Franchising vs licensing compare contrast business model. By helping you understand what intellectual capital is, what revenue your company is entitled to, and how to manage these intangible assets, he provides the. 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 exchange, the franchisee puts up the initial capital for the business, helps to promote the brand and pays a licence fee. Licensing vs franchising top 5 best differences with infographics.
A franchise is a license to use the name, trademarks, and proprietary products of an existing company. Score offers free, confidential small business advice from successful. 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. For this right, the dealer pays a fee for the right to sell the trademarked goods of the producer. 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. The difference between franchising and licensing is that franchising is used for goods whereas licensing is. A contractual license granted by one person the franchisor to another. Recent labour decisions on franchise bakery in south korea international franchising committee, march 2019 this article focuses on an incident, which occurred in late 2017, that had the potential to set an important precedent at the intersection of korean labor and franchise laws. However, franchising and licensing come from two distinct areas. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed.
What is the difference between franchising, distribution, ag. The unique nature of international franchising may, however, create social pressures, cultural clashes, and perceived challenges to national cultures. The difference between licensing and franchising can be drawn clearly on the following grounds. The definitive resource for corporations in myriad industriesnow completely revised and updated. Pdf franchising is a young sector in transition in croatia.
Introduction to franchising small business administration. At the other end of the spectrum is the licensing model, where you pay for the use of the intellectual property, but you are free to run your business. Structuring licenses to avoid the inadvertent franchise. Owning a franchise allows you to distribute the companys products as well as to use. Documents to start a franchise internicola law firm. Opening a franchise can be a lowerrisk way to start a small business, but its not for everyone. The documents to franchise your business include the franchise disclosure document fdd, franchise agreement, operations manual, financial statements, and state specific registration applications. 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. Definitions franchising is a business model in which you.
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. A comprehensive difference is shown in the following table. A franchise is a type of license that a party franchisee acquires to allow them to have access to a businesss the franchiser proprietary knowledge, processes, and trademarks in. Creating a franchise agreement requires a good understanding of what sets the business apart from the competition and what makes it successful enough to warrant franchising to other locations. It allows franchiser to augment his distribution chain in minimum time.
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. Please be aware that this franchise agreement is only an agreement and does not contain the required disclosure document under the franchise rule. Below we discuss each franchise document in detail. On occasion, a licensing agreement can turn into unintentional or accidental franchising if the contracts are drafted incorrectly or if the licensor controls the licensees business operations. The advantages and disadvantages of franchising by david e.
Yet, these situations arise with considerable frequency. Though there are some elements that differ, the key to success with franchising is the same as with an independent businesshard work. All publications are available to download free of. For a company looking to expand, franchising and licensing are often appealing business models. Franchising is a way to scale a business once it is successful and proven.
In exchange for these rights and services, the franchisor receives an upfront fee for the rights to a geographic area, as well as royalties based on sales. Under this, dealers were given the right to distribute goods for a manufacturer. Franchising is a most common practice of expanding the business, through a licensing relationship, wherein the owner provides training, equipment, ingredients, and marketing support to the other entity. This is because licensing is not subject to the ftc franchise rule. Franchising definition entrepreneur small business. At the end, you receive it in word and pdf formats for free. There are many opportunities for people who want to explore careers and business.
Franchising vs licensing difference and comparison diffen. Our franchising lawyers have a vast depth of skill in representing and advising domestic and international franchisors in all facets of their franchise operations. In good company managing intellectual property issues. Whats the difference between licensing and franchising. Franchising is a form of licensing whereby a parent company, the. Master thesis internationally franchising the sdc by j. Business format franchising accounts for most of the explosive growth in franchising that has occurred in the past five decades. Whats the difference between franchising and licensing. Pdf implementation of franchising as a business model in. Franchising vs licensing top 5 best differences with infographics. Dec 01, 2014 to understand the difference between licensing and franchising the starting point is to look at what each term means. The document is created before your eyes as you respond to the questions.
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