Your choice within the franchising vs. licensing debate rests purely on your desires and desires as a business owner. Ask yourself starting a franchise, some key inquiries to understand which sort of business arrangement is most appropriate for you:
Licensing and Franchising Which One is true for you.
• Do you discover the securities laws that cover franchises to be burdensome?
• Does the franchise you are considering have a proven record of success?
• Are you searching for a better entry into the business, with fewer requirements? If so, a contract is often much easier to finalize than a franchise agreement.
• Do you favour a greater degree of control in managing your business? If so, licensing is again the higher choice. If you prefer having many elements of your business pre-planned for you, head within the franchise direction.
Franchising vs. Licensing: Advantages and downsides
If you get a franchise, you get all the benefits of remaining self-employed, but you mitigate the risks by being a part of a proven business that typically features a customer base ready and waiting. You will also gain a monopoly within a selected territory, and your initial investment could be below starting a business on your own.
For the franchisors, who are in the business franchising allows them to expand their business for the purpose of investment than opening a new locations themselves. Other advantages of starting a franchise include the fact that you simply know what the business sounds like when it is successful, and you will be able to benefit from economies of scale in your relationships with vendors and suppliers.
The downside of franchising lies mainly within the loss of control you have got as a business owner since the franchisor makes many of the selections for you. Of course, some business owners consider this narrowing of control a relief and thus a plus. Besides, the profits tend to be slightly below if you had your own business because as a franchisee, you usually must pay franchise fees to the franchisor.
Licensing and franchising share some similar advantages. Licensees also enjoy lowered risk because they are usually entering the marketplace with a known quantity and a built-in customer base. However, they enjoy much more freedom than franchisees.
A license allows the licensee to use, make and sell a concept, design, name or logo for a fee. They are advantageous for licensors because they permit them to expand their business’ reach without having to take a position in new locations and distribution networks.