Franchising Verses Licensing for Increased Brand Visibility

In the business realm, various strategies and methods are employed to expand a company’s reach and market presence. Two popular approaches for expanding a business are licensing and franchising. Franchises and licenses are both business agreements in which certain brand aspects are shared in exchange for a fee. The key difference with franchising verses licensing is that a franchising agreement pertains to a business’s entire brand and operations. A licensing agreement conversely only applies to registered trademarks.

Delving more into the differences between licensing and franchising; franchise agreements involve an extensive business relationship between the franchisor and franchisee. However, license agreements are limited and relate to a singular activity, including the shared use of a trademark.

In essence, franchising is an agreement between two parties where one party (the franchisor) permits another party (the franchisee) to use its brand name or business model for a fee to conduct the business as an independent branch of the franchisor. Within every franchise agreement is a license to use a trademark. License agreements however do not include the overall control and uniformity found in franchise agreements. The latter will enjoy the right of a business on behalf of the franchiser instead of a fee where the franchisor closely controls the processes.

Licensing, is an agreement between two parties, where the licensor sells the licensee the rights to use its intellectual property or manufacture the licensor’s products, in exchange for a royalty. Independent businesses use license agreements. Franchise agreements create a singular brand with uniform systems and operations. The latter party would acquire the right to use products and goods, where the ownership remains with the licensor.

While they both involve granting rights to third parties, there are indeed distinct differences between licensing and franchising. Franchising typically works best for service-based businesses, whilst licensing is more conducive to product-based businesses.

Franchise Administration can assist with the required documentation and provide advisory support for compliant franchising, across South Africa.

For further assistance and more information on franchising verses licensing – Contact Franchise Administration