Its easy to become confused between franchising and licensing because on the surface they sound remarkably similar. Traditionally, licensing is limited to a someone granting a license. Used by businesses across the world, these two models carry their own sets of advantages and shortfalls. Take software and database technology, for example, which are invariably exploited through licensing. Ensure there is a sound distribution channel in place with concentration on surveillance and security. You are attempting to convince a company to pay you a royalty on the wholesale of your product.
The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps. Franchising vs licensing difference and comparison diffen. One advantage is that licensing costs much lesser in terms of the initial investment and ongoing charges. Licensing arrangements are governed by standard contract law so there are less administrative burdens than in a franchising arrangement. Adobe already offers a passwordbased solution for encrypting pdf files. The licensor owns the asses and the licensee has the rights to use the assets. 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. Do i need to credit adobe for the fonts i use in my projects. Difference between franchising and licensing compare the.
Differences between licensing and franchising marketing. Compare licensing vs franchising a business costs franchising a business overview franchising is a popular way to start a business because its much less risky than creating a business from scratch. Fla offers several membership types to address specific needschoose the membership that is right for your business and enjoy all the benefits starting today. Build biotech tags, electronic signatures or holograms into products to distinguish them from fakes 6. Hidden camera investigation on what really happens to your car cbc marketplace duration. This is a question that a lot of business owners and aspiring entrepreneurs ask themselves as they try to figure out which business model may be best for them. 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. At the franchise institute, we encourage people to consider the two options carefully before they. But this is not the case, as franchising is totally different to licensing. The difference between licensing and franchising can be drawn clearly on the following grounds.
While licensing relationships, without question, possess a legitimate purpose, they are extremely limited and cannot serve as an endrun around franchise regulation. The major difference between franchising and licensing. Aug 12, 2017 the difference between licensing and franchising can be drawn clearly on the following grounds. 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. You can secure a power pdf license for a single payment that wont expire ever.
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. Contact an experienced franchise, distributorship and licensing lawyer serving orange county and all of california. 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. Indeed, to be a proper franchisee you are required to use their logo, name, product, and business system.
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. 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 how these options differ. This webinar discusses in detail the various alternatives to franchising, their relative strengths and weaknesses, and their legal requirements. Likewise, if the licensing company does not allow the use of its trademark, logo, advertising, etc. However, some people still think that franchising and licensing are almost the same and have no specific difference. Generally speaking, a longer term means you can enforce provisions like payment, noncompete, etc. In assessing this you need to consider if someone else using your ip or product in a manner you would not approve would.
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. This is because licensing is not subject to the ftc franchise rule. 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. Licensing involves fewer requirements in that unlike franchising, there is no specific legislation setting out how you can and cannot deal with a licensee. Little caesars pizza little caesars pizza franchisees often comment that theyve enjoyed life experiences they never thought possible, thanks to their growth as a little caesars business owner.
While franchising is perhaps the worlds most powerful growth vehicle, the entrepreneur considering growth options would be. In licensing, another individual is buying the rights to use aspects of another companys branding, products, and trademarks in exchange for a percentage of. In a pure trademark license, a licensor grants a single license to one licensee to enable the licensee to manufacture a product according to the licensors specifications, and to sell such product under the licensors trademark. Check the boxes below and click the button at the bottom of the page to request free information from multiple franchises. Franchising vs licensing differences between franchising. Unlike a licence agreement, franchise agreements will contain specific directions on how the franchise must operate. What is the difference between franchising and licensing in. Licensing, franchising, and other contractual strategies.
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. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a licensor. However, a nonfranchising licensing agreement usually does not include the rights for the grantee to use the granting companys brand or trademark. Licensing also works well where the licensor has developed some specific technology, knowhow, brand images or design which are attractive to licensees who wish to incorporate it into their existing businesses. May 12, 2010 compliance with these laws can be cumbersome and can delay the rollout of your licensing program. Also, the franchisee is expected to create its own niche and identity in the market. 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. That is because a licensee does not hold the rights to the trademark and logo of the parent companys brand. Franchising vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models. 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. Simplification of business licensing single online application and payment process. How is pdfmachine licensed when sharing the printer on a network. A license arrangement is primarily composed of 2 elements.
In a nutshell, a franchise is a license wherein the licensor controls the licensee and benefits from that cont. Certainly no licensor expected to end up defending franchise allegations. If you continue browsing the site, you agree to the use of cookies on this website. Role of licensing developing countries vs uk wider regulatory framework standards, market surveillance, sanctions consultation challenge and complaints. Take software and database technology, for example, which are. Jul 10, 2017 franchising might be right for your business, but it is not your only option. However, licensing a business is generally far less expensive than buying a franchise. For a company looking to expand, franchising and licensing are often appealing business models. Elements of a franchise a franchise has been described as a license on steroids. Maas pros, headquartered in markham, canada has been assisting businesses in implementing profitable and measurable digital marketing solutions in the areas of websit.
Your work in this initial stage should be directed at answering and supporting the question why should my company license and invest in you and your product. It was one of the founding members of the world franchise council. Password based security systems, surveillance and firewalls. Licensing is the practice of legally allowing the use of assets most commonly intellectual property rights owned by one business to another. However, failure to comply with these laws can subject youyour companys principals to liability for damages or rescission. We will now turn to the differences between licensing and franchising. Yet, these situations arise with considerable frequency. The main differences are summarized in the following table.
Likewise, a good pdf editor must be able to export pdfs into other editable formats such as microsoft word and powerpoint, html, or plain text, maintaining the original files hyperlinks, images. This legal difference forms the basis for what information needs to be included in each type of agreement. Another form of trademark license is a collateral product license. But if you are starting a small business that is dependent upon selling products of a big company, there are two ways you can do it. It is really a great feeling to be changing over from an employee to an owner. Franchising and licensing association singapore fla, started as singapores national franchise body. A nationwide view on statelicensed mortgage entities. The portable document format pdf is a file format developed by adobe in the 1990s to. What is the difference between licensing and franchising. This license allows a thirdparty licensee the right to use the licensees trademarks. Pdfcreator is free software, distributed under the terms of the agpl. 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.
Franchising is an arrangement in which the franchisor permits. Licensing doesnt have the same level of control, and the licensees determine their marketing system and the way they want to sell the products or services. You are attempting to convince a company to pay you a. Many business owners choose to implement a licensing agreement arrangement to expand their business. Updated july 18, 2011 conference of state bank supervisors 1129 20th street, nw, 9th floor washington, d. Create a license agreement to control viewing of pdf files. That is, license agreements cannot be used to create franchisetype relationships without the franchise regulation. This legal difference forms the basis for what information needs to. Important on franchise vs licensing agreement example. Pdf files may be optimized using adobe acrobat software or qpdf. A nationwide view on statelicensed mortgage entities 2011.
Licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark. Dec 23, 2008 while licensing relationships, without question, possess a legitimate purpose, they are extremely limited and cannot serve as an endrun around franchise regulation. On the other hand, licensing allows risk mitigation through tranche milestone payments and eliminates the need to integrate any liabilities attached to the acquired entity. Differences between licensing and franchising marketinginsider. Unless specifically prescribed in the licensing agreement, the licensee usually operates independently with little oversight and support from the licensing business. 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. What is the difference between franchising and licensing.
Many potential business owners are confused between the concepts of a franchise and license a. 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. Difference between franchising and licensing difference. In such a situation, the licensor needs to either a. Difference between licensing and franchising with comparison. Jan 07, 2011 difference between franchising and licensing large companies have both the models to offer to a person who wishes to be liked with them.
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. Structuring licenses to avoid the inadvertent franchise. Dec 29, 2014 licensing the license does not transfer ownership of the intellectual property, but merely gives the licensee the right to use it. What is the difference and how do you know if franchising vs. As a business owner, one has to choose from the two models as to how he wishes to go ahead. A key difference lies in the area of law by which each business type is governed. Youll pay an upfront fee to purchase the license, but recurring costs will be.
Licensing how does franchising compare with licensing. The major difference between franchising and licensing we would like to take a minute to answer a very common question often asked. Advanced edit word processing capabilities within your pdf file. 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. In addition, many of these laws have provisions for criminal penalties, civil fines and the award of attorneys fees. Stakeholder engagement licensing officers government policy leads business representatives lga. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ.
Licensing the license does not transfer ownership of the intellectual property, but merely gives the licensee the right to use it. How does franchising differ from licensing in australia. In 2008, adobe published a public patent license to iso 320001 granting. Licensing the relationship between a licensee and the parent company is not as tightknit as a licensee franchisor relationship. Legal and policy implications the digital dilemma citation below captures the report of the committee on intellectual property rights and the emerging information infrastructure and computer science and telecommunications board commission on physical sciences, mathematics, and applications of. Aug 07, 2015 franchising vs licensing business film booth. Franchise vs licensing will appear in the spirit of the conformity rather than its name. Scope licensing act 2003 gambling companion animals taxi and private hire.
Your brand, the patents, knows how, the trademarks etc. Whether you are licensing or you are franchising, the significant thing is to defend your ip. Click here to request our free onehour webinar, alternatives to franchising. Ensure licensing and franchising provide oversight of ip 4. If you try to operate a franchise business as a distributorship or licensed relationship you are opening yourself up for all sorts of legal and financial liabilities. Franchising might be right for your business, but it is not your only option. The next step in licensing is proving your product. Licensing is basically a method of distributing products and services, and may come in the form of a distributorship, an agency agreement, or a franchise arrangement. Learn vocabulary, terms, and more with flashcards, games, and other study tools. This guide discusses some of the differences between a simple license and a franchise. Cost when you license a business, there are no franchise fees, marketing fees or royalties. Licensing is an older, more established business model than franchising. Acquisition involves a much larger upfront investment than licensing and the acquirers have to bear all uncertainties about the future development of the targeted biotech.
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