Pdf implementation of franchising as a business model in. 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. Companies can also develop a shared approach to human rights issues by joining. While they may mistakenly be used interchangeably they are two distinct concepts and this article will discuss their differences to assist you in deciding between franchising vs. Partnerships are a common organizational structure when two or more people start or expand a business. Two powerful ways to grow your business in any economy 4 by sherman, andrew j. Brief overview of franchising and licensing relationships. Figuring out whether or not franchising will work for you is a matter of knowing your business and yourself. Both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper. Franchising and licensing association singapore fla is here to equip companies with the necessary tools for successful franchising both locally and overseas. 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. These may include national marketing, accounting, pointofsales information, site selection, and site acquisition. A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. Licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark.
After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ. Several types of partnerships exist in the business environment. Franchising vs licensing difference and comparison diffen. International franchising and licensing request pdf. Growth through licensing and franchising licensing renting your brand or other intellectual property to increase sales. The advantages and disadvantages of franchising by david e. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps. Designed for use by the franchise attorney or professional, it is the preeminent work for the franchisor who either is. While a pure trademark license is not usually covered by franchise and business. For a company looking to expand, franchising and licensing are often appealing business models. Social franchising in emerging markets tel archives ouvertes. Franchising allows a company the franchisor to expand by granting other individuals or companies the franchisee the right to operate a copy of the franchisors brand and business methods in an area for a set period. Acquisitions can also help a franchise develop sufficient scale to compete with a larger rival more effectively. Unclear about the differences between licensing and franchising.
Franchising franchise operations manual free how to franchise seminars. Providing effective advice in franchising depends upon accurately assessing the unique relationship between franchisors and franchisees. International franchising and licensing request pdf researchgate. Difference between franchising and licensing difference. Starting and running a small business can be challenging, so its important to determine what is best for you and your business. Accordingly a franchise agreement is typically a lot more prescriptive than a license agreement. 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.
Franchising your small business may be a good way to grow fast. Business format franchising accounts for most of the explosive growth in franchising that has occurred in the past five decades. Franchising and licensing association singapore fla was established in 1993 with the mission to nurture and develop singapores franchise industry. When trying to expand or leverage your successful business to further growth two models that are commonly used are franchising and licensing. International franchising 3rd edition is an indepth examination of the most important and practical questions relating to international franchising. Both can be a route to successful expansion, as an alternative to organic growth and with less risk. Licensing and franchising contracts have similarities, but also some significant differences. The difference between licensing and franchising can be drawn clearly on the following grounds. Now that you understand the difference between franchising and licensing its time to decide where your priorities fall for your business. Licensing and franchising, what is the difference and does it. Our franchising lawyers have a vast depth of skill in representing and advising domestic and international franchisors in all facets of their franchise operations.
We will now turn to the differences between licensing and franchising. But this is not the case, as franchising is totally different to licensing. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. Merges at university of california, berkeley school of law. However, some people still think that franchising and licensing are almost the same and have no specific difference. In exchange, the franchisee puts up the initial capital for the business, helps to promote the brand and pays a licence fee. Licensing top national franchise lawyers based in ny. Licensees also enjoy lowered risk because theyre usually entering the marketplace with a known quantity and a builtin customer base.
Introduction to franchising small business administration. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Respect for human rights in franchising and licensing relationships overview brief overview of franchising and licensing relationships licensing and franchising contracts have similarities, but also some significant differences. Selecting the right type of business structure is an important part of starting and operating a business. Information transfer through training in franchising enterprises. Under this, dealers were given the right to distribute goods for a manufacturer.
Differences between licensing and franchising marketing. Franchising and licensing, and mergers acquisitions from a to z. Brouthers and others published international franchising and licensing find, read and cite all the research you need on. Acquiring a franchise supplier or distributor could build efficiency through vertical integration. Whether you are licensing or franchising, the important thing is to protect your ip. Its popularity has to do with its proven track record of success, and. In franchising, the franchisor licenses its intellectual property to the franchisee. Mergers and acquisitions are common in the business of franchising whether acompany is acquiring another franchise or being acquired itself.
Royalty rate structure in case of franchising annals of economics. To franchise, or not to franchise, franchising and. The main differences are summarized in the following table. Franchising is a faster, cheaper form of expansion than adding companyowned stores, because it costs the parent company much less when new stores are owned and operated by a third party. Licensing and franchising share a few similar advantages. What is most important to you as a small business owner. Brouthers and others published international franchising and licensing find, read and cite all the research you need on researchgate. But which model is better franchising vs licensing. Licensing and franchising abstract every business organisation has its own strategy of survival and growth in the market depending on the kind of business environment it is being operating. Franchising by its very nature is multibottom line focused there are a remarkable variety of methodologies to adapt and incorporate into your own franchise system franchising at its best is the business of improving quality of life for the people we serve. More competitive the markets are the more is the burden on these business organisations to ensure that they. In franchising, the franchisee gets the right to display the same brand logo, trademark, name and image. Pdf franchising is a young sector in transition in croatia. Well help you address issues at the outset before they become major problems.
This is because licensing is not subject to the ftc franchise rule. You can sign up as a fla member today to enjoy our members benefits. A franchisor looking to merge with or acquire another company first has to find a target. Converting licenses to franchises franchise consultants. These strategies include licensing, whole owned subsidiaries, joint venture, exporting, direct investment and strategic alliances. Relations between franchisors and franchisees european parliament. Pdf determining pros and cons of franchising by using swot. It also requires sound practical advice to manage the relationship. 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. On the flip side, potential for revenue growth is more limited because the parent. In addition to franchising, there are two other popular methods by which businesses expand their market and distribution channels. Pdf this report is an attempt to compare the advantages and disadvantages of franchising which is one of.
It is important that you are aware of the possibilities offered. 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. Study findings also indicated that firms intending to go international do consider various factors when making a. Converting licenses to franchises january 14th, 2019 ifranchise group request a copy of the whitepaper on converting franchises to licenses and viceversa, an informative piece exploring the business issues and pros and cons of franchise and nonfranchise systems. Launched in 2005, the fla awards gives franchisors the recognition they deserve. However, they enjoy a lot more freedom than franchisees. Two powerful ways to grow your business in any economy edition 4 available in hardcover, nook book. Franchising on the other hand is often confused with the term licensing. Franchising would only work, kennedy decided, if the relationship between headquarters and franchisee was a true partnership, rather than the usual fiefdom. Many times, people think licensing is an easier route to franchising. Pdf franchises are a mechanism for developing contractual distribution.
However, while franchising is a regulated industry and there are startup costs and expenses associated with franchising your business, it is critical that you. Franchising is an arrangement in which the franchisor permits. 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. Everyday low prices and free delivery on eligible orders. What is the difference between franchising, distribution, ag. So, licensing can be a good way to start if you are interested in franchising your business. We represent a full range of franchisors, from startups to national and international franchise systems. Franchisees pay the franchisor a onetime fee upon joining. Whats the difference between a licence and franchise. In franchising, the franchisor licenses its intellectual property to the.