Brand Tuned - Smart Thinking, Better Branding
Shireen Smith (from YouTube) - Part 2 Licensing And Franchising, What Is The Difference And Does It Matter?
Sep 14, 2020
When it comes to licensing a business format, whereby you grant a third party the right to replicate your business, the important point is that franchising traditionally involves a number of formalities and costs that you can avoid when you choose the licensing route
- One way to scale their business is to issue a licence to a third party to deliver a related product under their brand name
- Grant a licence to someone to sell your product under their own brand name
- Luxury brands are highly sought after for licensing, as their brand brings a cachet to the product to which they lend their name
- Pierre Cardin is a classic example of this, by engaging in indiscriminate licensing, it devalued its brand and lost much of its cachet
- One of the key issues is how ownership, control and use of the brand can be spread between different businesses
- Why the Distinction Between Franchising and Licensing Matters
- It’s not possible to escape the regulators’ attention by passing off a franchise as a licence because the law looks at the essence of an arrangement rather than its name
- Business owners in the UK can, therefore, be misled into believing that franchising is their only option
- Franchising gives you the potential for national and international expansion, rapid growth with lower capital outlay.
- My suggestion, if it would work for your business model, is to give yourself time to evaluate whether franchising is the right option by testing the waters with licensing first
- Licensing is a type of legal agreement for exploiting IP that is highly flexible