Franchise Resource Center
Franchising and Licensing
Companies often have gotten into expensive legal battles trying to avoid the costs and regulation associated with franchising. As a result, they end up spending more time and money than if they structured their business correctly from the start.
From a legal standpoint, if it looks like a duck, quacks like a duck... it's a duck! If you permit the use your brand name, provide exclusive territories, regulate business activity and levee a penalty for noncompliance - your a franchise and subject to Federal Trade Commission regulations.
A franchise provides the right to display the brand, logo, trademark, name and image of the parent company. There is a well defined working relationship between the franchisee and the franchisor. Franchisors provide training as well as on-going support to the franchisee. The franchisor also retains control over the services and/or products that are offered by the franchisee in a defined territory.
Licensing does not create a bond between the parent company and licensee. The agreement does not provide the right to the parent's brand, logo, trademark, name and image. There is no training or support provided by the parent company. Because the licensee is not using the company’s brand, the two work as a completely separate entities. Additionally, and possibly the most important, a licensee is not extended any territorial authority and their is no exclusivity. Therefore, the parent company has the right to licenses others in same region and/or enter the region themselves.
Franchising provides a franchisee a complete blueprint, or duplication, of the parent company business. In exchange for the right to operate as a part of the same entity in a defined territory, the franchisor retains the right to have control of the way a franchisee operates their business. This protects the franchisor's name and brand equity. FRANCHISING: Same brand, logo, trademark, name and territory rights. LICENSING: No territory rights, training or support.
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