Franchising vs. Licensing: What is the Difference?
If you want to be your own boss, control your workplace, boost profit, and leverage the benefits of an established reputation and image, franchising or licensing may be right for you. While these both are sought-after models to make your business dream come true, they arenu2019t the same. Have a look at the differences between franchising and licensing so you can decide which can be the right fit for you and your business goals. Franchising Franchising is a form of marketing and distribution in which the owner of the business sells the right of the brand including products and services, intellectual property, and more, to an individual or group of individuals to run a similar business under that brand's name. To open a franchise, the franchisee or the business owner will pay fees to the franchisor. There are many franchise loans available that help a franchisor to obtain funds for paying fees, providing training, and covering operating costs. While you get the freedom of flexibility and self-employment with franchising, you donu2019t have much control over certain decisions as a franchisee. A franchisor retains control over how their brand is used and so controls many aspects of the business such as pricing, operations, and marketing. Since you have to pay a franchise fee, the profits can be slightly lower. Moreover, the selection process of owning a franchise is very complicated. You need to meet certain financial requirements such as minimum net worth, liquid capital, management, skills, and more. Some of the most famous franchise businesses include Mcdonald, Burger King, Dominos, Marriott International, Subway, 7-Eleven, and The UPS Store. Licensing Licensing, on the other hand, is a business model, where an individual or group of individuals pay for the use of the intellectual property and licensed material, but they can run the business however they like. Since a licensor doesn't control the operations of the licenses, you have more liberty to create, develop and advertise a product or service to further increase profitability and market shares. Although the licensor wonu2019t provide a licensee with any support like training, marketing, and site selection, it may specify the purpose their brand is to be used. Compared to the franchise, you have more freedom to market your business more freely. Also, youu2019re free to negotiate the terms of your contract. With so many good things about licensing, itu2019s also important to know that you have more responsibility with licensing as licensors wonu2019t provide much support. Moreover, it creates added competition in the marketplace and is offered for a limited time. At Smansha funding marketplace, we help small business owners find and compare a variety of loan offers to purchase license or franchise business. The application process is easy and simple and it only takes a few minutes to apply for the loan. Once approved, you can get the funds into your bank account in as little as 24-48 hours.
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