Difference Between Licensing

and Franchising

Many think that franchising and licensing are

same, but the fact is that they are different, only
the advantages of franchising are similar to
those of licensing. The first and foremost
different between licensing and franchising are
that the former is mainly associated with the
production and marketing of goods while the
latter is related to the service business.
When it comes to business expansion, the first
thing that strikes our mind is ‘international
business’ a term we hear frequently, but many
facts are yet to be disclosed.
There are several ways of entering the global
arena to serve the foreign market; that helps to
earn better returns for the company. This can be
done by transferring skills and product offering,
which they acquire from their unique
competencies to the foreign market. The
five major ways of entering a foreign market are
exporting, licensing, franchising, forming joint
ventures or establishing a wholly owned
subsidiary.

Comparison Chart
Basis for
Licensing Franchising
Comparison
Licensing is an Franchising is an
Meaning arrangement in which a arrangement in which the
company (licensor) sells franchisor permits franchisee
 Basis for
Licensing Franchising
Comparison
the right to use to use business model or
intellectual property or brand name for a fee, to
produce a company's conduct business, as an
product to the licensee, independent branch of the
for royalty. parent company (franchisor).
Franchising regulations or
Governed by Contract Law Company Law as the case
may be.
Registration Not necessary Mandatory
Training and
Not provided Provided
support
The licensor has control
Franchisor exerts
on the use of intellectual
Degree of considerable control over
property by the licensee,
control franchisee's business and
but has no control on the
process.
licensee's business.
Involves one time transfer Needs ongoing assistance of
Process
of property or rights. franchiser.
Fee structure Negotiable Standard

What is licensing
A business arrangement in
which one company gives
another company permission to
manufacture its product for a
specified payment. There are
few faster or more profitable
ways to grow your business
than by licensing patents,
trademarks, copyrights, designs,
and other intellectual property
to others.

EXAMPLE
Subway, 7-11 and Dunkin Donuts.
Examples of licenses include a
company using the design of a
popular character, e.g. Mickey
Mouse, on their products. Another
example would be a clothing
manufacturer like Life is Good
licensing its designs and brand in
a certain country to a local
company. It can also apply to the
use of software, e.g. a company
using Microsoft Office on its
computers.