Workers warehouse

Franchising Vs Licensing Your Business – Considering Your Options

So, you’re ready to grow your business and you’ve started to hear suggestions along the lines of “you should franchise” or “grant them a licence to operate” as different ways in which you can effectively expand your business.

Slightly confused?  Wondering which model is better for you?  Trying to decipher which one will better suit your business?

Franchising

Generally speaking, franchising is a successful strategy to grow a business once the company and its systems are successful and proven.  Whilst any type of business can be franchised, not all should be – and whether or not you choose this as a business model all depends on what you want to achieve, and how you want to go about doing it.

At the most basic level under a franchise model, you retain control and ownership of the brand and license both the brand and the business model to a franchisee.  Whilst the know-how, training and marketing are provided by you as the franchisor, it is the franchisee who is required to put up the capital needed in starting the franchised business.  Under the franchise model, you as the franchisor maintain a considerable level of control over the operations and processes used by the franchisee.

Licensing

A licensing model on the other hand offers licences for the use of the Intellectual property owned by your company to licensees, and whilst you may exercise control over how your Intellectual property is used – you do not have any control over the business operation of the licensee.  In this licensing arrangement, you do not retain much control over how the licensee operates the business.  In effect, whilst you can specify the purpose for which the Intellectual property is to be used, licensees operate virtually independently from licensors, and you in turn provide little or even no support to the licensee.  

A licensing agreement can be drafted and be put in place quickly, with minimal cost to you and your business.  A franchise on the other hand requires a bit more work – and whilst both franchising and licensing arrangements require a franchisor or licensor to give careful consideration to what is on offer to a franchisee/licensee, a franchise model requires you to standardise your internal systems, operations, distribution and marketing networks.

Alongside this, there are extensive regulatory requirements that must be complied with before you can start offering franchises.  As such, this normally puts most people away from the idea of franchising their business.

You may, as a starting point, decide to grant licence agreements prior to going into franchising.  Whilst this is not ideal, this may work for you if your business model supports this and you have a very clear understanding of your growth objective and the strategy required to achieve it.  If however you wish to not only grant a right to use the intellectual property but also the systems and operations of the business, then franchising is the model for you.  Whilst there may be a bit more work involved in getting your business franchise ready, the consequences of getting it wrong far outweigh the cost of getting it right from the get go.

If you have any questions regarding the difference between licensing and franchising your business, or would simply like to speak with one of our knowledgeable and experienced Commercial Advice lawyers – please don’t hesitate to get in touch with us.

Share:

Send an enquiry

Any personal information you provide is collected pursuant to our Privacy Policy.

Categories
Archives
Author

More posts

Employers should exercise caution when dismissing during probationary period

Can you dismiss an employee during the probationary period? Yes, but a recent case is a lesson in caution. The recent Federal Court decision of ‘Dabboussy v Australian Federation of Islamic Councils’ is a warning to employers to consider the importance of timing if dismissing an employee during probation.

The business impacts from the Government’s new cyber security laws

Cybercrime ‘is a multibillion-dollar industry that threatens the wellbeing and security of every Australian’. In an effort to combat the impact on businesses and individuals, the Australian Government has introduced cyber security legislative reforms into the Parliament.

A guide to intrafamily adoption

Adoption is the process where a parent’s legal rights for their child are transferred to another person. The formal adoption of a stepchild or close relative is known as intrafamily adoption.

Passenger movement and visa data-matching by the ATO

Heading overseas for work or a holiday? Taxation issues, including tax residency, should be on front of mind when departing from or arriving to Australia. Why? Because the Australian Taxation Office (ATO) can follow your footprints and, if you’re not careful, spring unexpected taxes on you.

Is it really necessary for my executor to have so many powers?

People often question why the executor of their estate needs to have so many powers. Simply put – if your executor isn’t given any additional powers by your Will, then they are limited to what is set out in the Trustee Act. One area that this can lead to issues in, is the family home – particularly if beneficiaries aren’t in agreement.

Essential terms of a commercial lease

A commercial lease is a contract that details the rights and obligations of a tenant and landlord. So, what are the necessary terms of a commercial lease?

Responding to data breaches

In the final part of our four-part series on your business’ responsibilities related to cyber attacks and data breaches, Special Counsel John Bennett how businesses should respond to data breaches, including application and requirements of the Notifiable Data Breaches Scheme.

Security of personal information

Part 3 of a four-part series on your business’ responsibilities related to cyber attacks and data breaches where Special Counsel, John Bennett provides an overview of some court decisions and proceedings where ‘security’ of personal information has come into issue.

Parental alienation in Family Law

The concept, Parental Alienation Syndrome, was initially brought about by American psychiatrist Richard Gardner in 1985. The term parental alienation is used to describe a situation where one parent is involved in psychologically manipulating their child to turn against the other parent.

Are you liable for labour hire workers if they are injured?

Many employers (host employers) engage employees of labour hire companies, particularly in the building and construction, hospitality and manufacturing industries. However, what happens when one of these employees gets injured at the host employer’s work site? Who is liable for the injuries?

© 2024 Coleman Greig Lawyers  |  Sitemap  |  Liability limited by a scheme approved under Professional Standards Legislation. ABN 73 125 176 230