Advantages of licensing and franchising. What Are the Pros & Cons of Franchising? 2018-12-22

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Advantages and disadvantages of buying a franchise

advantages of licensing and franchising

Software is often licensed to end users. After all, why should you spend a premium on a big name when you can just duplicate their efforts? Process Involves one time transfer of property or rights. You can franchise almost any type of business. The name recognition that comes with , as well as the franchisor's system standards that all franchisees must follow, assures the customer that they can enjoy the same quality of experience and products in your location as in any other location. It's a lot harder to innovate with franchising than if you own your own outlets. Company Image Your franchise location image is tied to the image of the franchise company.

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Advantages and disadvantages of buying a franchise

advantages of licensing and franchising

Anything that boosts sales, but not profits will create conflict between you and the franchisee. Coupons boost sales, but not always profits, benefitting the franchisor, but not necessarily the franchisee. Consider the classic example: Franchisors make money by collecting a percentage of sales as a royalty for letting the franchisee use their brand name and operating system. Franchising offers three major benefits to business owners seeking to expand operations: Related: Access to better talent. As well as training programs and first-hand support, most franchisors help find and retain customers and assist with setting up accounting or stock control systems. Ongoing and online support is typically available, as well as special alerts and continuing education. The franchisee gains control over operations in exchange for some type of payment and the promise to abide by the terms of the contract.

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Licensing arrangements

advantages of licensing and franchising

Patenting a production process prevents other companies from using your techniques. Unfortunately, the costs don't end there. The only thing that changes is that one day this person is a manager, the next day the person is a franchisee. You may get slightly frustrated if your plans for your outlet are hampered by company policy on what you can and cant do. In less than three years, we had over 190 clinics sold.


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Licensing and Franchising

advantages of licensing and franchising

Registration Not necessary Mandatory Training and support Not provided Provided Degree of control The licensor has control on the use of intellectual property by the licensee, but has no control on the licensee's business. If the franchisee believes that they'll have the freedom to do as they please, you're better off dispelling that notion early in the process. This can be done by transferring skills and product offering, which they acquire from their unique competencies to the foreign market. In a franchising model, the franchisee uses another firm's successful business model and brand name to operate what is effectively an independent branch of the company. And that does allow you to grow more aggressively because the cost of getting into a franchise program is much less than the cost of opening a unit after unit after unit for almost any business.

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Licensing arrangements

advantages of licensing and franchising

Franchising Franchising is a way to scale a business once it is successful and proven. Governed by Contract Law Franchising regulations or Company Law as the case may be. But when the advantages outweigh the disadvantages, it can be a great way to grow your business. A franchise is an extension of an already existing brand or business that wants to expand. As a franchisor, this can give you the flexibility to consider markets in which corporate returns might be marginal. You can, however, license your processes out to other companies, whether you're making cars, chemicals, clothes or cheese. Rather than diving straight into franchising with all the due diligence and formalities that it entails, you could start by finding a few licensees who are willing to license some or all of your business model.

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Difference Between Licensing and Franchising (with Comparison Chart)

advantages of licensing and franchising

An entrepreneur by becoming a franchisee of Raymonds will be able to sell the suiting fabrics at ease due to the well established name. When you franchise your brand or business, you retain an enormous amount of power. The cost of relicensing can also be expensive, as can the process of applying for different licenses. However, they can also restrict product sales outside certain markets and regions. Having said that, some licensing can look a lot like franchising. A licensing agreement can be completed in a week.

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What Are the Pros & Cons of Franchising?

advantages of licensing and franchising

The franchise owner still will have competition from other companies, but he will have the support of his franchise company within his territory to help improve his chances of success. And, of course, the fourth question is where the rubber meets the road -- differentiating the offering from its closest direct competitors. However, there is little information available to educate brand owners on how these two strategies differ, and overlap. He might open the doors for piracy or having the technology stolen from him if he doesn't have good legal representation. The franchise company spends the money on market research, and you as a franchise owner would be able to apply that information to your marketplace and increase your revenue. If you like having many elements of your business pre-planned for you, head in the franchise direction.

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Advantages & Disadvantages of Licensing Agreements

advantages of licensing and franchising

Higher success Rate: When entrepreneurs buy a franchise, they buy an established concept that has been successful. The diversity of products and services offered by franchised businesses makes the option appealing to many aspiring entrepreneurs or business owners looking to scale and expand their businesses. The process of opening a privately owned business is complicated and daunting, especially for anyone getting into business for themselves for the first time. That is you select a franchise system that does not offer you a true competitive advantage. As a franchise owner, you would have the benefit of using that experience to help your business grow. Franchising is seen by many as a simple way to go into business for the first time.

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What Are the Pros & Cons of Franchising?

advantages of licensing and franchising

They will look to the essence of the agreement rather than its name. Franchisees stand a much better chance of success than people who start independent businesses. Arrangements A typical franchise includes rights to Trade Mark, trade names, logos, patents, trade-secrets and know-how of a business. Motivated Management Another stumbling block facing many entrepreneurs wanting to expand is finding and retaining good unit managers. The many messages of your materials. Franchisees, on the other hand, could open and operate successfully in markets that are not high on your priority list for development. Disadvantage: Overly Dependent on the Licensor The licensee assumes a big risk by accepting a licensing agreement rather than purchasing the intellectual property outright.

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