Business

Difference between franchise and license

Main difference

The main difference between franchises and licenses is that franchises are generally related to the service business, while licenses are normally associated with the production and marketing of goods.

Franchises vs. licenses

Franchising is generally related to the service business, while franchising is normally associated with the production and marketing of goods. Franchises are managed by legal sanctuaries, while licenses are governed by the law of agreements. Franchise registration required due to security law; on the other hand, there is no need to register for a license. The franchise is offered with territorial rights; on the contrary, licenses with territorial rights are not offered and a licensee can sell similar products and licenses in the same area. The franchisor provides the support and training, while the licensing does not provide any support or training. The trademark or logo is used by the franchisee and retained by the franchisor, while the license can be granted under license. The franchisor implements its control over the franchise; on the other side, the licensor has no control over the licensee. The franchise needs the ongoing assistance of the franchisor; conversely, licensing involves a one-time transfer of rights or ownership. The franchise fee structure is standard; rather, licensing fees are negotiable. Franchising tends to be a start-up situation as far as franchising is concerned, whereas in licensing, licenses are typically taken by well-established companies. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses. Franchising tends to be a start-up situation as far as franchising is concerned, whereas in licensing, licenses are usually taken by well-established companies. The duration of the franchise contract in franchises is normally 5 to 11 years, while the duration of the terms of the contract is 16 to 20 years, which is usual in licenses. Franchising tends to be a start-up situation in terms of to franchising, while in licensing, the licenses are usually taken by well-established companies. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses. while in licenses, the licenses are normally taken by well-established companies. The duration of the franchise contract in franchises is normally 5 to 11 years, while the duration of the terms of the contract is 16 to 20 years, which is usual in licenses. Franchising tends to be a start-up situation in terms of to franchising, while in licensing, the licenses are usually taken by well-established companies. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses. while in licenses, the licenses are normally taken by well-established companies. The duration of the franchise contract in franchises is normally 5 to 11 years, while the duration of the terms of the contract is 16 to 20 years, which is usual in licenses. Franchising tends to be a start-up situation in terms of to franchising, while in licensing, the licenses are usually taken by well-established companies. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses. while the duration of the terms of the contract are 16 to 20 years usual in the licenses. The franchise tends to be a start-up situation as far as the franchise is concerned, while in the licenses, the licenses are normally taken by companies well established. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses. while the duration of the terms of the contract are 16 to 20 years usual in the licenses. The franchise tends to be a start-up situation as far as the franchise is concerned, while in the licenses, the licenses are normally taken by companies well established. The duration of the franchise agreement in franchises is normally 5 to 11 years, while the duration of the terms of the agreement are 16 to 20 years usual in licenses.

Comparison chart
Franchising License
The franchise is based on a marketing concept, adopted by an association as an approach for business expansion. The license is an official permit or permission to possess and use something, as well as the document of that permission.
Ruled by
securities law contract law
Record
Necessary Not required
territorial rights
Offered to franchisee not offered
Support and training
Provided not provided
Trademark/Logo Usage
Used by a franchisee, retained by the franchisor can be licensed
Control
Exercising control over a franchisee You have no control over the licensee
Duration
5-11 years 16-20 years
fee structure
Standard Negotiable
examples
Subway, McDonald’s, 7-11, Dunkin Donuts, etc. Microsoft office, mickey mouse, life is good, etc.

What is a franchise?

Franchise means an agreement between the franchisor and the franchisee in which the franchisor allows the franchisee to use the brand or business model for a fee, to conduct business as an independent arm of the franchisor (parent company). The franchise occupies the entire occupational plan that includes all intellectual rights, goodwill, trademarks, know-how and business contacts. The franchise is immersive. Franchising tends to be a startup situation as far as the franchisee is concerned. The duration of the franchise agreement in franchise is normally 5-11 years. The franchisee in franchise is very definitely selected by the franchisor, and the replacement of him is also controlled by the franchisor. The franchisor is obligated as a party to an agreement to convey to its franchisees the full occupational format, including profits and losses from ongoing research programs. The franchisee always participates additionally to the setting up of the business than the belongings he received, although the franchisor does retain the main goodwill.

Owning a franchise allows an individual to become more involved in an established system with the support and training of the franchisee and to become self-employed. There is ongoing research and development, less risk of failure, and a semi-monopoly in a specific territory. Franchising allows franchisors to build their business for less business instead of founding their new locations themselves. An entrepreneur should look at the financial statements, their income and cash flows and compare them to competitive franchises in those similar areas. They must research intellectual property issues such as patent ownership and trademark availability search.

What are licenses?

License means an agreement in which a company (licensor) sells a company’s right to use intellectual property or produce a product to the company’s licensee in exchange for royalties. In other words, licensing is normally associated with the production and marketing of goods. Licensing is governed by the law of agreements. Registration is generally not required for licensing. Licenses are not offered with territorial rights, and a licensee may sell similar products and licenses in the same area. Licensing does not provide any support or training. Licensor has no control over Licensee’s business, but may control Licensee’s use of the Intellectual Property. Licensing involves only a one-time transfer of rights or ownership. The license fee structure is negotiable. A license agreement only requires one to complete the process.

The advantages of licensing are that a license allows the licensee to create and sell an idea, use, design, name or logo for a fee. For licensees, they are very beneficial because they allow them to expand their business limit without investing in new places.

Key differences
  1. Franchising is generally related to the service business, while licensing is normally associated with the production and marketing of goods.
  2. Franchises are managed by legal sanctuaries, while licenses are governed by the law of agreements.
  3. Franchise registration required due to security law; on the other hand, there is no need to register for a license.
  4. The franchise is offered with territorial rights; instead, licenses with territorial rights are not offered and a licensee can sell similar products and licenses in the same area.
  5. The franchisor provides the support and training, while the franchisor does not provide any support or training.
  6. The trademark or logo is used by the franchisee and retained by the franchisor, while the license may be granted under license.
  7. The franchisor implements its control over the franchise; on the other hand, the licensor has no control over the licensee.
  8. The franchise needs the ongoing assistance of the franchisor; conversely, licensing involves the one-time transfer of rights or ownership.
  9. The franchise fee structure is standard; rather, licensing fees are negotiable.
  10. Franchising tends to be a start-up situation as far as franchising is concerned, whereas in licensing, licenses are normally taken by well-established companies.
  11. The duration of the franchise is the franchise agreement normally from 5 to 11 years, while the duration of the terms of the agreement are from 16 to 20 years usual in licenses.

Final Thoughts

The above discussion concludes that franchises are generally related to the service business, while licenses are normally associated with the production and marketing of goods.

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