Difference Between Licensing And Franchising Pdf

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difference between licensing and franchising pdf

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There are several ways of entering the global arena to serve the foreign market; that helps to earn better returns for the company.

By Madhuri Thakur. Licensing refers to an arrangement between licensor and licensee where latter party would acquire the right to use products and goods where the ownership remains with the licensor whereas Franchising refers to an arrangement between franchiser and franchisee where the latter will enjoy the ownership of a business on behalf of the franchiser in lieu of a fee where the processes are closely controlled by franchisor therefore it is generally seen that licensing is for products and goods whereas the franchising model is used more in service providing industry. These two jargons are usually synonymously used while marketing or selling a product whose brand value is not typically owned by the seller; however, there is a very fine line of difference between these two modes of business. Today we attempt to understand the differences between Licensing vs Franchising.

Licensing vs Franchising

An explanation of franchising vs. Both franchising and licensing can help you get there. A franchise is an extension of an already existing brand or business that wants to expand. It is an asset of your brand governed by the federal securities law. When you purchase a franchise, you pay fees for the right to operate a business, participate in a standard operating system, and use the brand name and proprietary information of the franchise. The diversity of products and services offered by franchised businesses makes the option appealing to many aspiring entrepreneurs or business owners looking to scale and expand their businesses.

Understanding the difference between franchising and licensing is important for business owners looking to expand their operations. But it is also important for aspiring entrepreneurs who are interested in purchasing a franchise or licensing a product. Licensing is a broad term that businesses use for contracting purposes. In exchange, the licensee pays royalty fees to the licensor. The licensor may have a say in how the intellectual property is used but not how the licensee operates their business. A licensor will grant a licensee the right to use their intellectual property but the licensor will not provide support or training or exert any control over how the licensee uses that intellectual property. For instance, Starbucks licenses 41 percent of their stores the remainder are corporate owned.

There is a lively debate about the differences between licensing and franchising. That makes it often hard to understand. The main differences most agreed on can be found here. Before turning to the differences between licensing and franchising, we should take a closer look at the definitions of the two concepts. Both concepts are ways in which the firm can establish business in other markets and therefore entry modes. Under licensing , the licensor gives a right to the licensee against payment, e.

Difference between licensing and franchising pdf

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 technology, whereas franchising involves a relationship that goes beyond the grant of a license and includes a relationship of control where the underlying business is required to operate in accordance with designated systems and procedures. When comparing franchising vs licensing, many times, the question arises as to whether or not licensing is an alternative to franchising? The answer to that question is that, no, licensing is not an alternative to franchising. The reason is that the franchise laws broadly define a franchise as a relationship that involves a the license of a trademark, b a degree of control over business operations i. So, if your goal is the unit expansion of your business, i.

Difference Between Licensing and Franchising

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4 Comments

  1. Eudosia M. 21.05.2021 at 15:27

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  2. Neri R. 28.05.2021 at 05:44

    Both the positive aspects and the lacunas associated with licensing are substantially discussed further in this paper.

  3. Tara B. 30.05.2021 at 06:53

    Licensing and franchising are very similar in some respects.

  4. Parris H. 30.05.2021 at 12:08

    For a company looking to expand, franchising and licensing are often appealing business models.

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