The license does not transfer ownership of the intellectual property, but merely gives the licensee the right to use it. Accordingly a franchise agreement is typically a lot more prescriptive than a licence agreement. At the franchise institute, we encourage people to consider the two options carefully before they. The first and foremost difference between licensing and franchising are that the former is mainly associated with the production and marketing of goods while the latter is related to the service business. At the franchise institute, we encourage people to consider the two options. Often we are asked what is the difference between a franchise and a licence. A license agreement is simply a business contract between two parties. What is the difference between franchising and licensing. Whats the difference between a licence and franchise. Aug 20, 2009 what is a franchise license all about. Large companies have both the models to offer to a person who wishes to be liked with them.
Difference between licensing and franchising with comparison. 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 case of freedom, a licensee has more freedom with regard to the business. Jan 28, 2017 often, the difference between a licence and a franchise comes down to whether. Experienced california and orange county franchise lawyer. The important difference is that a licence arrangement tends not to involve the replication of an existing business format. Distinguishing license agreements from franchise arrangements. Difference between a suspended and a revoked license. If you are looking for ways to expand your successful business, you may be tossing up between using a franchise or licence model.
The term license has two meaningsone in common terms a driver s license, for example, and one in business and commerce. A key difference lies in the area of law by which each business type is governed. We would like to take a minute to answer a very common question often asked. A suspended license is not the same as revoked license. However, the ruling falls short of providing a clear framework for determining whether a license arrangement is subject to the arthur wishart act franchise disclosure, 2000 wishart act, as the decision simultaneously considers two. The difference between licensing and franchising can be drawn clearly on the following grounds.
In a nutshell, a franchise is a license wherein the licensor controls the licensee and benefits from that cont. We will now turn to the differences between licensing and franchising. Traditionally a business owner like you wants everybody to operate under. Difference between licence and license difference between. Licensing, franchising, and other contractual strategies. In a nutshell, a franchise is a license wherein the licensor. The more severe your violation, the more severe the penalties can be. Structuring licenses to avoid the inadvertent franchise. Indeed, to be a proper franchisee you are required to use their logo, name, product, and business system. Learn vocabulary, terms, and more with flashcards, games, and other study tools. A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. A franchise is a license issued to someone to operate a business using a common brand name, a common operating support. Apr 09, 2017 what is the difference between a licence and franchise agreement. Many think that franchising and licensing are same, but the fact is that they are different, only the advantages of franchising are similar to those of licensing.
But knowing the difference is important to understand before you sign on the dotted line. Business practices such as franchising, technology transfer, publication and. A franchise is a license issued to someone to operate a business using a common brand name, a. What would be the difference between a 5 year renewable term or a 10 year renewable term, for us, and what would be the difference for the licensee.
Difference between franchising and licensing difference between. The major difference between franchising and licensing. The most distinctive feature of a franchise agreement is that a franchisor exercises significantly more control over franchisees than a licensor. Since it is a great way to get start in this chapter we will cover the basics to give a solid understanding of what it means to be a franchise owner.
Marilyn monroe estate, 2014 onsc 4584 provides some guidance on the distinction between franchise agreements and license agreements. Certainly no licensor expected to end up defending franchise allegations. You must follow the rules in your state on whether a driver s education course is required schools that prepare drivers for cdl are often two to three weeks in length or longer much longer than driver s education courses for traditional licenses. 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. A franchise provides the franchisee with a comprehensive system for managing its business. As a business owner, one has to choose from the two models as to how he wishes to go ahead. After having clarified what these two concepts actually mean, one can also understand how licensing and franchising differ. This legal difference forms the basis for what information needs to be included in each type of agreement. We are often asked what the difference is between a business operated under licence governed by a distribution agreement and one operated under a franchise agreement.
Often, the difference between a licence and a franchise comes down to whether. Yet, these situations arise with considerable frequency. While franchising is a recognized legal terminology, in the sense that it subjects the party offering these services to certain rules and regulations, licensing does not come with these issues, but it is necessary to be careful as licensing can also be. In its simplest form, a licence is where a person called the licensor owns or has rights to. In a typical licensing agreement, the licensor grants the licensee the right to sell goods, apply a brand name or trademark, or use patented technology owned by the licensor, in exchange for payments to the licensor paid by the licensee for use of. There are, however, important differences between a licence and franchise agreement that you should understand. Dec 15, 2014 difference between licensing and franchising the hallmark of a franchise is the nature and extent of the control that a franchisor exerts over the operation of a franchisees business. Telling the difference between a franchise and a business opportunity can get very confusing sometimes. In franchising, the franchisee gets the right to display the same brand logo, trademark, name and image as that of the parent company. What is the difference between a licence and franchise. There are three major types of franchises business format, product, and manufacturing. A license to driving certain vehicles has been applied to many countries. By comparison with a license contract, a franchise is.
When you franchise your brand or business, you retain an enormous amount of power. Difference between licensing and franchising praxis legal. Whether or not your business model is a franchise system depends on several factors. What are the pros and cons to a shorter or longer term for this agreement. Residual profit or loss the difference between total profits and the profits. Each model has its advantages and can offer an effective strategy for expansion. Hi, what is the difference between license and franchise business english. A franchise is an extension of an already existing brand or business that wants to.
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. You supply the business model, and you can define the territory in which any given franchisee can operate. Difference between licensing and franchising the hallmark of a franchise is the nature and extent of the control that a franchisor exerts over the operation of a franchisees business. What is the difference between franchising and licensing in. Most of us often get confused between the terms licence and license. Difference between franchising and licensing difference. Where licensing is just a simple agreement or contract between the licensee and the licenser, franchising involves securities law and other legal formalities. A license american english or licence british english is an official permission or permit to do.
Leonard can help you understand the difference between franchise laws in california and the laws that apply to licensing agreements. Firstly, franchising in australia is governed by the franchising code of conduct the code. In order to understand the difference, it is necessary to understand exactly what a licence and a franchise are. Jun 19, 2000 franchisees and licensees whats the difference. Another difference is that a franchise may include the right of the grantee to sell products or services in a specified geographical area or territory. In the uk, license is used as a verb, while licence is the noun. Many potential business owners are confused between the concepts of a franchise and license a. So you can see that while a licence provides the licensee with the right to use certain property for a certain period of time. Difference between franchising and licensing compare the. For franchisors, franchising allows them to expand their business for less investment than opening new locations themselves. Assess the factors driving the increase of homebased franchises. It is very similar to a franchise in that the brand owner licensor gives permission to the individual licensee are you sensing a theme here. Aug 12, 2017 the difference between licensing and franchising can be drawn clearly on the following grounds. Unlike a licence agreement, franchise agreements will contain specific directions on how the franchise must operate.
The licensor owns the ip rights being licensed and grants the limited right to use them to the licensee. They important difference is that a licence arrangement tends not to involve the replication of an existing business format. An agreement between a licensor to a single licensee for a single license. But this is not the case, as franchising is totally different to licensing. What is the difference between a licensee and a licensor. Difference between a commercial and regular drivers.
There certainly are some major differences between the two words, right from the usage, convention, and form of expression. A license in its most general sense is a permit from an authority to own or use something. Companies strive to create brands, characters and celebrities they can license to other businesses. What is the difference between franchising and licensing in regards to expanding a business when it comes to expanding a business, whats. Franchising is a form of business licensing but how does franchising differ from licensing in australia. Still, there are some important differences between a licence and a franchise agreement you should be aware of before opting for either of them. And undoubtedly, the more franchise locations you have, the more money you will make. How does franchising differ from licensing in australia. If the answer is yes, then you have entered into a franchise agreement.
A licence agreement is a formal agreement in which the owner of the intellectual property sells the right to use that property to other businesses, and gets royalties in return. Licensing helps them increase their market share, drives. Another fundamental difference between franchising and licensing is the amount of control a franchisor holds over the franchisee. What is the difference between a licence and franchise agreement. Sometimes we use them interchangeably, though it is not recommended. It really depends on how much control you want to have over your operators. Below is an excerpt from microsoft on office 2007, which i would assume is a similar policy to what wouldve been used on 2003.
Franchise agreement basics a franchise agreement is a usually lengthy document and covers such area as the cost of the franchise, royalty payments, rights and obligations of franchisor and franchisee, territory rights, training and support, as well as disclosure of financial documents. Dec 29, 2014 licensing is where a business grants a thirdparty, known as the licensee, permission to use the business patents, trademarks, s, designs, or trade secrets, otherwise known as intellectual property. Understanding the difference between a suspended license and a revoked license is important if you find yourself in trouble for certain types of traffic violations. What is the difference between a license and a franchise. The first and foremost difference between the words licence and license is the. Mar 18, 2010 most of us often get confused between the terms licence and license. Business owners may be under the mistaken belief that if they do not call their arrangement a franchise, then it isnt one. In franchising, there is a lot of support from the company to the franchisee in terms of advertisement and training whereas there is no such support in the case of licensing. In the case of a distributorship, the main points of difference with a franchise are that the arrangement is generally much less formal, may not have the same degree of certainty of term, may or may not be exclusive, might tend to cover a larger geographic. For a company looking to expand, franchising and licensing are often appealing business models. Nov 08, 2014 at one level there isnt much difference because a franchise is simply a tough licence under which the licensor imposes a great deal of obligations on its licensees and regulates every aspect of how the licensee operates its business.
Which is better, franchising or licensing franchise lawyers. Is there an agreement between you and the franchiseelicensee. You should refer to that page for a definition and application of the terms. Our web page licensing or franchising outlines the difference between licensing and franchising. Jan 07, 2011 difference between franchising and licensing. Differences between licensing and franchising marketinginsider. 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. In contrast, a licensing arrangement allows a licensee considerable freedom in the operation of his or her business. 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.
Differences between licensing and franchising marketing. As with a franchise, the licensees business benefits from the brand and intellectual property of the licensor, and the licensee pays fees to the licensor accordingly. Franchising vs licensing difference and comparison diffen. Legalvision is a techdriven, fullservice commercial law firm that. May 12, 2010 this guide discusses some of the differences between a simple license and a franchise.
Like a licence agreement, a franchise agreement is also a type of contract. Whats the difference between franchising and licensing. Franchising and licensing for consumer brands adds an important driver to the business relationship. When is licensing a good alternative to franchising. Licensing is where a business grants a thirdparty, known as the licensee, permission to use the business patents, trademarks, s, designs, or trade secrets, otherwise known as intellectual property. However, some people still think that franchising and licensing are almost the same and have no specific difference. At one level there isnt much difference because a franchise is simply a tough licence under which the licensor imposes a great deal of obligations on its licensees and regulates every aspect of how the licensee operates its business. Jan, 2020 understanding the difference between a suspended license and a revoked license is important if you find yourself in trouble for certain types of traffic violations. A licensee can mean the holder of a license or, in u. Jan 16, 2017 and undoubtedly, the more franchise locations you have, the more money you will make.
A franchise license helps create the commercial and contractual relationship between franchisor and franchisee. When and how to apply this method london march 9th, 2015. Elements of a franchise a franchise has been described as a license on steroids. As similar as these two may sound, theres quite a lot of differences between the two. 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. Whats the difference between a franchise and a licence. What is the difference between a franchise and a licence. If youre british, you need to know the difference between a verb and a noun before using licence or license. Ive read their definitions in many dictionaries but still havent understood them clearly. 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. The licensor owns the ip rights being licensed and grants. How franchising differ from licensing in australia. The feedback you provide will help us show you more relevant content in the future.
In franchising, you have to pay royalty to the company every time you make a profit while in licensing, you keep the profits for yourself. Licence and license the difference grammar monster. Being a franchise owner is one of the greatest ways to achieve business ownership and satisfy your entrepreneurial spirit by being in the driver s seat of your own destiny. We have also advised both franchisees and licensees. Tuesday, nascar team properties exclusive console simulationstyle video game licensee, 704games, will release the latest version of. This guide discusses some of the differences between a simple license and a franchise. A shorthand definition of a license is an authorization to use licensed. Tuesday, nascar team properties exclusive console simulationstyle video game licensee, 704games, will release the latest version of the nascar heat franchise.
Difference between a commercial and regular drivers license. Create a licensing agreement to benefit both parties. What is the difference between licensing and franchising. We have successfully launched this in four zip codes and are negotiating our first license agreement out of the area. It passes on certain rights to the franchisee to use the name, logo, and identity of the established brand in order to start a branch of the franchise. I am often asked the difference between a franchise business model, a distribution model, and a licensor licensee relationship. What is the difference between a licensor and licensee. Difference between licensing and franchising praxis. 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. Its easy to become confused between franchising and licensing because on the surface they sound remarkably similar.
907 662 169 1594 511 23 1055 694 1047 698 541 802 143 269 284 1484 985 452 833 153 919 474 1130 924 1037 411 1421 501 759 595 1289