Although franchising has been and remains one of the most successful vehicles for the multi-unit expansion of a business, many entrepreneurs disregard franchising in favor of licensing, believing franchising to be a daunting task. In other words, they opt to license their trademarks to third parties without also guiding their business’s systems and processes.
Contrary to what some entrepreneurs would like to believe, licensing is a pale alternative to franchising. Not only is it extremely limited – certain restrictions minimize a licensor’s control over the business operations of his/her licensee(s) – but it is also conducive towards unnecessary litigation. The line between a license agreement and a franchise is very thin, and when a licensor crosses the line, albeit unknowingly, s/he opens him/herself to state and federal penalties.
Rather than risk the legal troubles that come with operating a license agreement as a franchise, it is much smarter to structure a franchise right from the start, especially if you have an established business system and a strong trademark. The advantages of franchising over licensing include the following:
- Multi-Unit Expansion – Franchisors can enjoy the expansion of their business through the efforts of franchisees.
- Capitalized Expansion – Franchisees facilitate and capitalize unit expansion – not you.
- Managerial Talent – Franchisees have a vested equity interest in the success of their business operation and, therefore, are more dependable.
- Additional Revenue Sources – Franchisors receive a steady, additional income stream from franchisee royalties.
- Scalability – Franchising is highly scalable, meaning it can be refined and customized to meet a wide variety of expansion plans.
Would you like to know more about the benefits of franchising over licensing? Download this free guide provided by The Internicola Law Firm, P.C. and give our Staten Island office a call today at (718) 979-8688 to get started on launching your own successful franchise. You may also submit an online contact form or use our live chat option and one of our dedicated team members will respond promptly to answer all of your questions.