How does international licensing differ from franchising?
Franchises and licenses are both business agreements in which certain brand aspects are shared in exchange for a fee. However, a franchising agreement pertains to a business's entire brand and operations, while a licensing agreement only applies to registered trademarks.
In a franchise partnership, the business belongs to the franchisee. The franchisee essentially runs the business for the franchisor, but at a fee. In a licensing partnership, the licensee only pays the licensor for a specific product, for which the licensor may have taken out patent rights.
International franchising and licensing enables companies to efficiently leverage their most valuable asset, their brand and associated intellectual property (encompassing trademarks, patents, know-how, and business and marketing systems) in return for royalties and/or products sales.
Licensing is purchasing the rights to produce a company's product in the licensee's country for a negotiated fee. Franchising tends to involve longer-term commitments than licensing. is one in which the parent company owns 100% of the subsidiary' stock. Seeking one's own self-interest, often through the use of guile.
(ii) Licensing means permitting other party in a foreign country to produce and sell goods under trademark, patents whereas franchising means sell or distribute the branded products in a specific geographical area, e.g., through its franchising system McDonalds operates first food restaurants in the whole world.
In the most basic terms, the biggest difference is the amount of support you'll get. With a franchise, you'll likely receive support in training, marketing, site selection and other areas, whereas a licensing agreement provides little or no support at all.
Advantages and Disadvantages of Franchising and Licensing
The level of risk of the licensor is low because there is zero or next to zero investment is involved. Licensee/Franchisee is the individual who is the resident of the same country which limits Government intervention. Thus, business runs without any hurdles.
The key similarity between franchising and licensing is that both business methods involve you allowing another individual to use your IP in exchange for payment. In franchising, this intellectual property includes the: brand – the name and brand of the franchise; and.
An international business licensing agreement involves two firms from different countries, with the licensee receiving the rights or resources to manufacture in the foreign country. Rights or resources may include patents, copyrights, technology, managerial skills, or other factors necessary to manufacture the good.
International licensing: International licensing gives a foreign business entity the right to manufacture or use a company's product for its market. While there are many benefits to international licensing for IP owners, there may also be obstacles exclusive to foreign territories, such as quotas or tariffs.
What is meaning of franchising?
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark.
Franchising is the practice of licensing another firm's business model as an operator. Franchising is the practice of using another firm's successful business model. For the franchiser, the franchise is an alternative to building “chain stores” to distribute goods that avoids the investments and liability of a chain.
11) One of the advantages of licensing is that the profits generated from such agreements are typically higher than for FDI.
The party providing the intellectual property is called the licensor while the party receiving the intellectual property is called the licensee. In a licensing agreement, the licensee typically pays an upfront fee in conjunction with a royalty fee.
- Determine if franchising is right for your business.
- Issue your franchise disclosure document.
- Prepare your operations manual.
- Register your trademarks.
- Establish your franchise company.
- Register and file your FDD.
- Create your franchise sales strategy and budget.
The combination of a franchising agreement and a business lease may seem odd at first, as the principle of a business lease is that the lessor remains the owner of the business throughout the agreement, while the franchisee is deemed to be the owner of its clientele (at least at a local level).
The advantage that licensing has over franchising is that license agreements are basic legal agreements that, typically, are not regulated and are less expensive to create.
Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company. Some examples of things that may be licensed include songs, sports team logos, intellectual property, software, and technology.
A franchise is a type of license. Although franchising and licensing are two different business relationships, a franchise cannot model an original business unless a franchisor grants a license to the franchisee to use its intellectual property.
| Advantages | Disadvantages |
|---|---|
| Does not require capital investment or presence of the licensor in the foreign market | Revenues are usually more modest than with other entry strategies |
| Ability to generate royalty income from existing intellectual property | Difficult to maintain control over how the licensed asset is used |
What are the advantages and disadvantages of licensing?
| Advantages to Licensing | Disadvantages to Licensing |
|---|---|
| You will not need to incur the costs of producing, promoting, packaging, or selling your product. | You will likely lose control over your product, including promotion, packaging, and selling. |
International licensing: International licensing gives a foreign business entity the right to manufacture or use a company's product for its market. While there are many benefits to international licensing for IP owners, there may also be obstacles exclusive to foreign territories, such as quotas or tariffs.
Franchising is the practice of licensing another firm's business model as an operator. Franchising is the practice of using another firm's successful business model. For the franchiser, the franchise is an alternative to building “chain stores” to distribute goods that avoids the investments and liability of a chain.
Advantages and Disadvantages of Franchising and Licensing
The level of risk of the licensor is low because there is zero or next to zero investment is involved. Licensee/Franchisee is the individual who is the resident of the same country which limits Government intervention. Thus, business runs without any hurdles.
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark.
Examples. Suppose Company A, a manufacturer and seller of Baubles, was based in the US and wanted to expand to the Chinese market with an international business license. They can enter the agreement with a Chinese firm, allowing them to use their product patent and giving other resources, in return for a payment.
| Advantages | Disadvantages |
|---|---|
| Does not require capital investment or presence of the licensor in the foreign market | Revenues are usually more modest than with other entry strategies |
| Ability to generate royalty income from existing intellectual property | Difficult to maintain control over how the licensed asset is used |
Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc). Read more. manumelwin. Licensing is another way to enter a foreign market with a limited degree of risk.
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Over the last 20 years there has developed three basic vehicles in which a U.S. franchisor expands internationally: (i) directly; (ii) joint venture; and (iii) master franchising, with master franchising being the most common method.
What franchise system is better local or international?
A local brand is often considered more trustworthy and desirable; especially given that not everyone has travelled the world and is aware of a particular international brand.
Licensing is designed to reduce the risks involved in doing business for everyone involved. From a licensee standpoint, there are fewer risks in product development, market testing, manufacturing, and distribution. From a licensor standpoint, there are fewer risks in the selling and service of what is being offered.
| Advantages to Licensing | Disadvantages to Licensing |
|---|---|
| You will not need to incur the costs of producing, promoting, packaging, or selling your product. | You will likely lose control over your product, including promotion, packaging, and selling. |
Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company. Some examples of things that may be licensed include songs, sports team logos, intellectual property, software, and technology.