What Distinguishes a Franchise from a License?

 
There are two main options for buying into an existing business: the franchise option or the license option. The differences between the two typically depend on how much control you have over the business. Not only that, but making the right choice can boost your business overall. Since there are legal matters to navigate, getting in touch with attorney Jonathan Barber of Franchise.Law is a great idea.

What Is a Franchise?

A franchise is a business arrangement that allows a business owner (franchisor) to open branches in new locations without being responsible for planting or managing them. Instead, they grant other investors (franchisees) the right to use their name, likeness, goods, trade secrets, and other intellectual property for a fee.
Ultimately, the new business will be almost a replica of the original company. The franchisee has to pay the franchisor an initial and continuing fee to secure the rights to set up a business. In return, the franchisor may offer training and take care of the business's inventory and other logistical aspects.

 
The franchisor retains massive control of the business regarding what you can or cannot sell, who to hire, and the quality of services to offer. So if you love some autonomy in business, this option may not be the best for you as you may feel a little restrained. However, it does come with the benefit of an already-established brand. You needn’t worry about the branding and other aspects: the franchise owner takes care of it all.

What Is a License?

A license option will be better if you enjoy having significant control over your business. Under a licensing business arrangement, the business owner (licensor) allows a licensee the right to use certain aspects of their intellectual property for an agreed-upon royalty fee.

 
The main difference between the license and the franchise model is the level of involvement and control the trademark owner will have on the licensee. In contrast to the franchise option, the licensor will have little control over how the licensee runs their business as long as their intellectual property rights are protected.
License agreements work best for brand names and trademarks that are highly recognizable and marketable. Calvin Klein is an excellent example of a brand name that follows the licensing model. Calvin Klein has built a reputation for quality over the years.

 
Other brands leverage Calvin Klein's reputation to sell their products by buying rights to use the trademark on all sorts of products, from watches, clothes and perfume.

Which One Should You Choose?

Your choice will depend mainly on the level of control you wish to have. The franchise model is the option if you are looking for a business with a high chance of survival without putting too much into marketing. However, you will have to contend with having little control over the everyday running of the business.

 
If you have a creative mind, a franchise can feel a little limiting, and you will be better off with a license. Whatever option you choose, ensure you understand the legal implications of each and work with a lawyer when entering into an agreement.

Conclusion

The key difference between a franchise and a license lies in the level of control. Franchises offer a proven business model with less autonomy, while licenses provide more control with fewer restrictions. Choosing the right option depends on your business goals and desired involvement. Consulting a lawyer can help navigate legal complexities.