Licensing Agreement Vs Franchise

Because of these cost differences, contractors sometimes opt for licensing agreements rather than franchising agreements; However, as mentioned, they are not interchangeable and often do not work for the same types of businesses. In addition, you also expose yourself to legal risk by entering into a licensing agreement for transactions that do fall under the franchise category. If the upfront fee prohibits you from creating a franchise, you should consider these lower-cost deductible options, or you can also look for franchise financing to help you fund these expenses. (a) Brand License – A trademark license, i.e. you license and use your name or brand to duplicate your business and create a new site or service area; With a franchise, you invest in an established company, and you get specific instructions on how to operate it and receive ongoing support and training to ensure success. With franchise owners, you are required to follow the franchisor`s system, branding and operating processes. They are also limited to operating within a given territory. Franchising provides investors with a detailed roadmap for success. With licensing, you will get the rights to a particular asset. It`s more like ordering something à la carte.

This asset can be part of a larger business. You can control the transaction at your convenience and use the licensed asset as agreed in a contract with the licensee. This in turn ensures that Pizza Hutte, that it can penetrate different markets without compromise in the quality of service and the franchisee in turn benefit from the economies of scale that comes with an already established brand. With licensing, the investor receives a specific item. A license allows the licensee to use, create and sell an idea, design, name or logo for a fee. It is a limited right related to a particular asset, not an entire business. The license agreement limits what the taker can or cannot do with the asset granted, but the license agreement does not allow the giver to exercise control over the overall operation of the taker`s activity. In the most basic terms, the biggest difference is the amount of help you get.

With a franchise, you`ll probably get support in the areas of training, marketing, site selection and other areas, while a licensing agreement offers little or no support. Learn more about these two business models so you can pick up the right choice. Some companies use licenses to evolve their businesses in a certain way. For example, most Starbucks sites are operated by companies, but they sometimes enter into licensing agreements so that they can use sites that are otherwise not accessible. These include food chains, bookstores or higher education institutions and universities. The company will also consider other large or high-traffic retail sites as potential sites for the Starbucks program. In a franchise agreement, the franchisor can set specific guidelines on how the franchisee markets the business, uses brands, where the business is located and how the business is managed. In other words, the franchisor can exercise much of the control over the franchisee`s business and operation – because it is essentially an extension of its own business. Calvin Klein collaborates with a number of manufacturers on licensing agreements. This means that Calvin Klein has licensed or lent its brand and brands to certain manufacturers, who then use the brand to sell their products.

Calvin Klein products such as underwear, perfumes and jeans are all manufactured and branded under licensing agreements. The comparison between franchising and licensing often raises the question of whether or not licensing is an alternative to franchising? The answer to this question is that licensing is not an alternative to