Licensing, Franchising, And Joint Ventures In A Nutshell!
Understand the distinctions between franchising, licensing, and joint ventures.
Which is optimal for your business? It might be difficult to decide whether to get into a franchise arrangement, joint venture or licensing deal. So Here’s What you should know.
What is licensing?
Licensing is a legal agreement between two parties, it involves obtaining permission from a company (licensor) to manufacture and sell one or more of its products within a defined market area. The company that obtains these rights (the licensee) usually agrees to pay a royalty fee to the original owner. License agreements can be exclusive or non-exclusive and can relate to a wide range of intellectual property assets that include trademarks, copyrights, patents, and music. License fees can be structured as a one-time fixed fee or on-going fees based on usage, sales, and other performance criteria.
Licensing agreements are similar to franchise agreements; they both relate to the shared use of business assets and intellectual property rights.
What are Joint-ventures?
Joint ventures is a business arrangement in which two or more companies combine resources on a project or service. The length of the agreement and what resources it will include varies. It is structured as a separate business entity or simply grows out of a contract between the parties. Joint ventures is typically temporary, dissolving after the task is complete. Participant companies typically agree to split any profits the venture creates. As a result, joint ventures are potentially advantageous for companies in need of expanded resources with minimal (or no) infusion of capital.
What is Franchising?
Franchising is a partnership in which one party allows another to borrow its business model or brand name. This is usually done at a fee. The party which lends its name or business model is called the franchisor, while the party paying fees for the authorization is the franchisee.
What is the significant difference between them?
| Criteria | Franchising | Licensing | Joint venture |
| Registration | Mandatory | Not Necessary | – |
| Governance | Franchise Act | Contract laws between parties | Joint venture Agreement |
| Training & Support | Mandatory | Not provided | – |
| Process | Requires on-going assistance from
franchiser |
Involves one-time transfer of
property or rights |
Time specific merge to execute task or business goal |
| Control |
Franchisor exercises control over
franchisee |
Licensor does not have control
over licensee |
Parties involved share control within the framework of their Agreement |
| Trademark Use | Logo and trademark retained by franchisor and used by franchisee | Can be licensed | Uses all partner trademarks simultaneously or creates a new one |
| Advantages |
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| Disadvantages |
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Licensor does not have control over the ultimate use of its intellectual property rights |
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| Example |
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