Write the difference between licensing and franchising.

The major differences between licensing and franchising are as follows −

  • Business model deals with products and goods.

  • Ownership is with licensee.

  • Governed by contracts law between parties

  • Without investing huge capital licensor will get vertical integration in market.

  • Licensor don’t have control over intellectual property rights.

  • Registration is not mandatory.

  • No training and support is provided.

  • One-time property/rights transfer.

  • Negotiable fee structure.

  • Royalties are commonly used term.

  • Covers single product/products.

  • Generally, established business will go licensing.

  • Business models deals with providing services.

  • Ownership is with franchisee.

  • Governed by companies’ laws and other federal laws (international business)

  • Franchisor get access to diversified market geographically.

  • High initial investment is required.

  • Registration is mandatory.

  • Training and support is provided.

  • Ongoing assistance is needed.

  • Management fee is commonly used term.

  • Covers total business

  • Generally, start-ups will go for franchise.

Updated on: 27-Jul-2020


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