Licensing vs. Franchising

Licensing vs. Franchising

LICENSING

Licensing is Lower Cost and Can Be Done Quickly.

If you are thinking about expanding your operation through franchising, licensing may be an alternative because

(1) it is substantially less expensive, and

(2) it takes about ten to fifteen business days to complete rather than months and months for franchises. Also, no past audited financial records showing successful performance are required in licensing.

Business Goals Often Can Be Met.

It is often possible to draft a license agreement that achieves the goals of the licensor and does not violate the various franchising laws.

Existing Businesses as Potential Licensees.

Existing businesses often buy a license and add the product or service to that existing business; this allows the licensee to keep his “bread winner” business going while he tests the licensing operations and thus reduces the risk on the acquiring the license.

Much Less Work on Daily Basis.

The day-to-day business operation of a licensor is customarily much less work and complex than the business of being a franchisor. If you become a franchisor, you generally have to give up the operations of your own business and enter the full time business of being a “franchisor”.

Avoid Complex Government Regulation. There is little or no government regulation in licensing, and there is substantial and complex government regulation in franchising.