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What Is Franchise And Licensing Agreement

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Keep in mind that while a franchise system gives you more control (as a result, you can guarantee consistency on your network), it also comes with more common obligations than franchisors. These include annual financial information, as well as assistance and training for franchisees. Some business opportunities offer the best of licensing and franchising. They offer tools or training to help you start your own business, but usually at a lower cost and with fewer restrictions than a deductible. Some companies use licenses to evolve their businesses in a certain way. For example, most Starbucks sites are operated by companies, but they sometimes enter into licensing agreements so that they can use sites that are otherwise not accessible. These include food chains, bookstores or higher education institutions and universities. The company will also consider other large or high-traffic retail sites as potential sites for the Starbucks program. At first glance, licensing may seem like an abbreviated version of franchising – which grants rights only to trademarks rather than to the business of an entire company – but both are very distinct agreements that should be used in different circumstances and for different types of businesses. Your system and written contract determine whether you are a licensee or a franchisor. Even if you enter into licensing agreements with licensees and do not consider yourself a franchisor, the Australian Competition and Consumer Commission (ACCC) can effectively qualify you as a franchisor. When you buy a franchise, you get all the benefits of independent activity, but you reduce the risk by being part of a proven company that usually has a ready and on-waiting customer base. You can also get a monopoly within a certain territory, and your initial investment may be less than setting up a business on its own account.

Another difference between the franchise and the licensing is the extent of the control that the seller can exert over the buyer. In all of these examples, the licence grants a limited right to a particular asset, whether it is a brand, a technology or a formula. The agreement that establishes the relationship between the taker and the licensant is referred to as a « licensing agreement » and, while the licensing agreement will limit what the licensee can or cannot do with the acquired asset, the license agreement does not allow the donor to exercise control over the overall operation of the taker`s activity. The McDonalds/Disney example allows Disney to have a say and control how McDonalds brands use Disney on McDonald`s Happy Meals, but Disney has no control over all of McDonald`s business. One of the best known examples of a franchise is McDonald`s. Since the beginning, the McDonald`s franchise now has more than 36,000 restaurants worldwide. (b) Degree of control – you ask your licensee to enter into an agreement that, as a franchisor, gives you some control over your franchisee`s activity, i.e.: They limit what they can and cannot sell from their business; and a licensing agreement allows others to use your brand or logo on their products.