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Franchising versus Licensing
This is a topic that comes up often. Many times I am contacted by a business owner who, by all accounts, has created a financially profiable licensing program but is faced with franchise violation claims. Also clients frequently question if licensing is better than franchising.Licensing is a Component to Franchising
To start with it is importantt to understand that "licensing" is a component to "franchising". That is every franchise includes a license but not ever license is a franchise.
What is the Difference?
What is the Difference?
Licensing, traditionally, is limited to the grand (by a licensor) of a license permitting a third party (licensee) to utilize the licensor's trademarks. From a legal standpoint franchising can be described as a "super license" where the franchisor grants the franchisee the license and right to use the franchisors trademarks and systems. The "plus elements" that legally convert a license into a franchise, include factors, such as:
Proceed with Caution
From a legal standpoint licenses are extremely limited. Many times what you believe to be or call a "license" is in fact a franchise. The laws vary amont the states and in many instances are intentionally ambiguous. So, proceed with caution and before structuring and proceeding with a "licensing program" speak to your attorney to ensure that the proper restrictions are in place and that you do not cross the line into franchise territory. Consider if you may be better off by just structuring a franchise - many times you will be better off.
- (a) Payment of a fee;
- (b) Payment of a royalty;
- (c) Control over advertising programs; and
- (d) control over franchisee opportunities.
Proceed with Caution
From a legal standpoint licenses are extremely limited. Many times what you believe to be or call a "license" is in fact a franchise. The laws vary amont the states and in many instances are intentionally ambiguous. So, proceed with caution and before structuring and proceeding with a "licensing program" speak to your attorney to ensure that the proper restrictions are in place and that you do not cross the line into franchise territory. Consider if you may be better off by just structuring a franchise - many times you will be better off.
To continue reading information about the option to franchise your business read:
"How to Franchise Your Business"
"How to Franchise Your Business"
IMPORTANT DISCLAIMER: The information contained on this website is provided for general educational purposes only, should not be relied on as legal advice and does not serve to create an attorney client relationship. In utilizing this website you acknowledge that there is no attorney client relationship between you and Charles N. Internicola, Esq. and that the information contained on this site does not and cannot serve as a replacement for the competent legal advice of a licensed attorney in your state. Further you acknowledge that any and all citations to cases and statutes must be independently verified by competent legal counsel to confirm the validity and accuracy of such information. The content of this site is subject to the Copyright of its author and owner, Charles N. Internicola, Esq.
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Video Library
Franchisor Services:
- How to Franchise Your Business | Franchise Lawyer
- What Does it Mean to "Franchise My Business"? | Franchise Attorney
- Franchise Systems | How to Franchise Your Business