On almost a weekly basis, I get asked the difference between licensing and franchising.
Below is my Franchise Euphoria™ Tip of the Day! addressing that distinction:
In Indiana, a Franchise is a contract that:
- provides a person/company (franchisee) with the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial party by a franchisor; and
- includes a plan substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and
- includes a requirement that the franchisee granted the right to engage in the business pay a franchise fee.
Licensing, on the other hand, is more of a business opportunity that does not include one or more of the elements outlined above. For instance, if you have a product that you sell and decide that you would like to license it to a distributor or another company for a period of time, you would typically structure the arrangement in a way that does not include a franchise fee or a requirement that the distributor or business sell it under your prescribed marketing plan.
While this may seem obvious on the surface, it can be quite challenging to differentiate between the two. If you have questions on the differences or are not sure what structure you are operating under, feel free to contact me.
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