Accelerating enterprises towards internationalisation. Franchising vs licensing is often the tough question potential wouldbe business owners ask themselves, as both are popular business models. Up to that point, some prominent franchises managed to operate in vietnam through a combination of trademark. Utilizes a network of local owners locally owned and operated operating under a shared brand. The difference between licensing and franchising can be drawn clearly on the following grounds. Pay the franchisor for the right to do business under the shared brand. 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. Aug 26, 20 both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper. The ifa educational foundation an introduction to franchising 5 an introduction to franchising a franchise is the agreement or license between two legally independent parties which gives. Fcc enforces franchising laws to promote broadband deployment. Implementation of section 621a1 of the cable communications policy act of 1984 as amended by the cable tv consumer protection and competition act of 1992.
Large companies have both the models to offer to a person who wishes to be liked with them. Differences between licensing and franchising marketing. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a licensor. This is because licensing is not subject to the ftc franchise rule.
Open source licensing the licence is what determines whether software is open source the licence must be approved by the open source initiative. Exporting brands through innovative licensing and franchising. Franchising is a type of licensing that goes beyond use of a specific product or branding and encompasses your business model. Utilizes a network of local owners locally owned and. Introduction franchising international franchise association. Franchising agreements, like trademark licenses, have to be recorded with the ministry of commerce of cambodia. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a. However, some people still think that franchising and licensing are almost the same and have no specific. Most of the time when we hear the term franchising it refers to business format franchising. 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. Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. Up to that point, some prominent franchises managed to operate in vietnam through a combination of trademark licensing and technology transfer agreements.
In 1994, moe was named vice president of business development and. To recognize the implication of these changes for companies that. Documents in econstor may be saved and copied for your. India business council, tentatively scheduled for late 2014, to further examine and discuss the franchising regime in india. It is important that you are aware of the possibilities offered. Operate the business in accordance with the operations manual. In fact, franchising is a method of distribution, not a particular industry.
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. After having clarified what these two concepts actually mean, one can also. Under the franchise laws before you offer or sell a franchise or accept any funds, you must first issue an fdd, properly disclose it, and, register and file with the. As a business owner, one has to choose from the two models as to how he wishes to go ahead. They want someone who will focus on being an owner business and management skills people and communication skills proven process franchisor trains on how to use their system. Finally, another important niche franchises should market to in the brazilian population is the millennial population, 47 million. Introduction to franchising he business model of franchising has been called one of the greatest ever developed.
Franchising and licensing association fla singapore was established in 1993 as singapores national franchising and licensing body with the mission to nurture and develop singapores franchising and licensing industry. The intellectual property rights that are licensed in a franchising arrangement almost always include. The relationship between a licensing organisation and licensee is also looser than its franchising equivalent. Accelerating enterprises towards internationalisation through. Trademark license agreement recitals schedule a article one. International franchising and licensing request pdf researchgate. Unlike a licence agreement, franchise agreements will contain specific directions on how the franchise must operate.
Licensing arrangements are governed by standard contract law so there are less administrative burdens than in a franchising arrangement. Either strategy can result in an incredible return on your. Business format franchises, on the other hand, not only use a franchisors. Certainly no licensor expected to end up defending franchise allegations.
Franchising on the other hand is often confused with the term. Files are available under licenses specified on their description page. The franchisor, being a business with a strong brand and a well. Difference between franchising and licensing compare the. 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. 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. In franchising, the franchisor licenses its intellectual property to the franchisee. Aug 02, 2019 fcc enforces franchising laws to promote broadband deployment full title. Jun 15, 2007 open source licensing the licence is what determines whether software is open source the licence must be approved by the open source initiative. Fla strives towards turning singaporebased companies into successful enterprises both locally and internationally. Many times, people think licensing is an easier route to franchising. Licensing is an arrangement in which a company licensor sells the right to use intellectual. Difference between licensing and franchising with comparison. Either strategy can result in an incredible return on your investment.
Differences between licensing and franchising marketinginsider. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ. To identify how a company can use franchising as a strategy to accomplish its mission. Its popularity has to do with its proven track record of success, and the relative ease in. As con sumer protection statutes, franchise laws are given a sweeping scope by courts. Tucker ellis represents franchisors and franchisees in local and national franchising and licensing matters. Under this, dealers were given the right to distribute goods for a manufacturer. Up until 2006, vietnamese law did not provide a clear legal basis for franchising arrangements. They want someone who will focus on being an owner business and management skills people and communication skills.
Franchising is a form of licensing whereby the franchiser provides a standard package of components or ingredients together with management and marketing expertise, and the franchisee. When you have a great business model, there are two powerful ways to see it reach its full potential. Like a licence agreement, a franchise agreement is also a type of contract. Moe returned to michigan in 1990 and established a private law practice, concentrating in franchising, licensing, and real estate law. Structuring licenses to avoid the inadvertent franchise. The dip allows the parties to conceal parts of the agreement which are irrelevant to trademark licensing and conditions required under the trademark law i. 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. Franchising vs licensing differences between franchising. Business format franchising is when the franchisor and franchisee have an ongoing relationship, and the franchisor provides a full range of services, including site selection, training, product supply, marketing plans, and even assistance in obtaining financing.
Property agreements, internet agreements, joint venture agreements, leasing and rental agreements, letters of intent, licensing agreements, loan agreements, management agreements. Franchising is a form of licensing whereby the franchiser provides a standard package of components or ingredients together with management and marketing expertise, and the franchisee provides capital, market knowledge, and personal involvement. The format specifies the location, design, the number of staff, incentives. Property agreements, internet agreements, joint venture agreements, leasing and rental agreements, letters of intent, licensing agreements, loan agreements, management. Licensing, on the other hand, allows a licensee to pay for. Licensing licensing, on the other hand, allows a licensee to pay for the rights to use a particular trademark. Franchisors want a person that can use their system. Used by businesses across the world, these two models carry. Consequently, a broad variety of unsuspecting business arrangements may qualify as franchises. We will now turn to the differences between licensing and franchising. Both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper.
Growth through licensing and franchising licensing renting your brand or other intellectual property to increase sales. Our franchising lawyers have a vast depth of skill in representing and advising domestic and international franchisors in all facets of their franchise operations. A franchise relationship contains 3 elements, the first 2 being similar elements as a license. A prominent example of dual distribution includes business format franchising, where firms, the franchisors, license operation of some of its units to franchisees. 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. This memorandum, produced for a number of our clients considering franchising, brings together a bullet point list of the advantages and disadvantages both business and legal of moving to a franchised system of operation. In product distribution franchising, the franchisor licenses its trademark and logo to. Franchising on the other hand is often confused with the term licensing. What are the pros and cons on licensing vs franchising. What is the difference between licensing and franchising. Pizza franchises franchise opportunities hungry howies.
The relationship between a licensing organisation and licensee is. To establish unified thinking about franchising and the language that must reflect that understanding. Yet, these situations arise with considerable frequency. Holmes northern california office s outhern california office 555 chorro street, suite d2 6621 pacific coast hwy. Difference between franchising and licensing difference.
Licensing usually involves being granted a license to provide a service or sell a product, rather than an entire business format or system. The franchisor, being a business with a strong brand and a wellestablished and profitable business model, looks to replicate that model by franchising it to other people the franchisees. The conference will introduce social franchising as a new concept in egypt which targets the empowerment of social enterprises developing more employment opportunities for disadvantaged people and achieve social aims. Fcc enforces franchising laws to promote broadband. Unlike franchises, in which the franchisor exerts significant control over the. The concept of franchising in romania, as in many other countries is a business concept which is spreading. In product trade name franchising, a franchisor owns the right to the name or trademark and sells that right to a franchisee. Implementation of section 621a1 of the cable communications policy act of 1984 as amended by the cable tv consumer protection and competition act of 1992 document. For legal compliance, some clients enter into a separate trademark licensing agreement with the franchiseelicensee and register that agreement with the dip. In business format franchising, the franchisee is granted the right. For this right, the dealer pays a fee for the right to sell the trademarked goods of the producer.
In product trade name franchising, a franchisor owns the right to the name or trademark. The advantages and disadvantages of franchising by david e. The obvious advantages of licensing over franchising include substantial lower legal costs, reduced accounting costs, no auditing costs, no registration in the franchise registration states and approval of. Franchising vs licensing difference and comparison diffen. Business format franchising accounts for most of the explosive growth in franchising that has occurred in the past five decades.
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. Franchise association ife defines a full business format franchise as. 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. The obvious advantages of licensing over franchising include substantial lower legal costs, reduced accounting costs, no auditing costs, no registration in the franchise registration states and approval of the license program with such state, and quicker entry into the marketplace. Aug 12, 2017 the difference between licensing and franchising can be drawn clearly on the following grounds.
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 allows another business to replicate your entire. In such a situation, the licensor needs to either a. This is most often seen in the soft drink or automotive industry. However, while franchising is a regulated industry and there are startup costs and expenses associated with franchising your business, it is critical that you. Franchise business as a generator of development in. However, the 2006 regulations provide a solid legal foundation for franchising. Franchising and licensing association fla singapore was established in 1993 as singapores national franchising and licensing body with the mission to nurture and develop singapores franchising and.
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