Licensing - The definition of a “license” is the grant to the “Licensee” (person or entity granted the right to use the trademark) of the right to use the “Licensor’s” (owner of the trademark) trademark, for a fee, and which use is subject to the Licensor’s “control” over the goods or services sold under the license. There are three pillars: (a) Licensor’s grant to the Licensee of the right to use Licensor’s trademark; (b) for a fee; (c) and Licensor exerts some direction and control over Licensee’s use of the trademark.
This model applies to owner/entities that wish to expand and collect fees from others that want to purchase, own and operate a business system that is offered by the owner/entity and operate under their trademark(s). The licensing model has limited control over the brand and does not have the same revenue potential and future value of a franchise organization.
Franchising - The definition of a franchise paraphrased here is a Franchisor’s grant to the Franchisee the right to use Franchisor’s trademark(s); for a fee; and Franchisor exerts a significant degree of control over and/or significant assistance in the Franchisee’s method of operation.
This model applies to owner/entities that wish to start a whole new business and grow a larger equity building business asset. A franchisor can expand and collect fees from others that want to purchase, own and operate a franchised business system that is offered by the owner/entity and operate under their trademark(s), business systems, training and ongoing support. Franchise buyers will typically pay a substantial “up front” Initial Franchise Fee as well as ongoing royalties and other fees. Royalties are usually a percentage (~4-6%) of each franchise owner’s weekly or monthly gross revenue. These ongoing fees enable the franchisor to continuously improve the value of the brand, the operating systems and provide ongoing support to the franchise community.
This model enables the franchisor to create an equity-building asset. The franchisees also realize a much higher success rate than all other business models.
