Most small entrepreneurs cannot afford to invent large quantities of products or advertise. The franchisor acquires this advantage if he or she acquires the right to use the franchisor`s purchasing power and advertising – most franchisors offer advertising assistance and direction. With the increase in the number of franchisees, the franchise`s public awareness is also increasing, which can be a huge promotional advantage. Franchisees nearby can also advertise together, which reduces costs. “I am a regular reader of lexology, the content of which is very useful to me.” Another fundamental difference between the franchise and the licensing is the level of control a franchisor has over the franchisee. When you franchise your brand or business, you keep a huge amount of power. They provide the business model and can define the territory in which a franchisee can operate. When you license a company, you sell the rights to use your company`s products and brands in exchange for a version of the royalties, which are usually an agreed percentage of the licensee`s sale. The licensee reserves the right to own the affected products or intellectual property rights. Licensing and franchising have similar advantages.
Licensees also benefit from a reduced risk, as they are generally marketed with a known quantity and an integrated customer base. However, they enjoy much more freedom than franchisees. As with starting a small business, there is always a risk. As the franchisee owns the business, it largely determines the success of the business. The franchisor may have an excellent program and a prestigious name, but at the end of the day, much of the risk is in the hands of the franchisee. The code also limits the types of clauses you can include in a franchise agreement. The code states, for example, that you cannot compel a franchisee to settle disputes through mediation or litigation in a location outside the state or territory where the franchisee keeps its business. If there is an inconsistency between the terms of the franchise agreement and the code, the code applies. When a person buys a franchise, they buy years of experience and the franchisor`s proven operating system. One franchisee put it this way, “What I learned from the franchisor was worth ten times what I paid for the franchise.” In every new business, a lot of time and money is spent on trial and error, but a proven franchise can eliminate many of these start-up problems, so you can open a franchise with little or no prior experience in a particular sector. For example, U.S. food manufacturer Borden, Inc.
has signed a licensing agreement with Meiji Milk for the manufacture and sale of Lady Borden ice cream in Japan. Meiji used the knowledge he had acquired from the license to manufacture and sell his own high-quality ice cream brands at the expiry of the license. Did you know that if you buy a pair of Calvin Klein underwear, it`s not really made by Calvin Klein? The only clothes that Calvin Klein makes itself are some of its women`s lines.