Franchising vs. Licensing

FRANCHISING is not the same as LICENSING.

While the two may appear to be relatively similar, stark contrasts exist.  Here are the key differences:


Franchisee and franchisor are closely linked and have better working relationships Relationships are not as tight-knit
Franchisee is allowed to use franchisor’s logo and trademarks Licensee has no rights to logo or trademarks
Franchisee is considered an extension of the parent company No territorial rights from the parent company
Granted territorial exclusivity and training and support is provided Very little training and support


BE CAREFUL.  Licenses could actually be franchises in disguise.

Franchise Agreements are powerful, rigid documents protecting the relationship of franchisor/franchisee.  A license agreement drafted to disguise a franchise agreement may skirt the laws of the Federal Trade Commission briefly, but ultimately the facts will challenge its validity down the road.

Selling a disguised franchise as a “license” can be the most expensive mistake a company ever makes.  These companies may start out selling “licenses” heeded from misguided advice in a worthless attempt to save money.  One of two avenues exists from here – litigation arising from selling an illegal franchise, or obtaining competent advice and discovering the realization of selling illegal franchises.  Government agencies may require full rescission rights to all persons that have been duped into these “licenses,” thus putting owners into and out of business for free plus having to refund all the money that was paid.