Franchise VS. Licensed Business Opportunities
First off let’s look at the franchise:
A franchise is a business model that has had some reported historical success and or effectiveness. The franchisor who created this business model will then sell you the rights to replicate and use the business model as well as the operating systems, proprietary services and or goods that his or her particular system happens to promote. Once you pay your franchise fee you will become an approved franchisee and have rights and privileges as stipulated within the terms of your franchisee agreement. This will include, but not be limited to the payment of royalty fees to the franchisor as well as any other fees due as per the agreement. The franchise agreement will also outline the assistance the franchisee will receive through the franchisor and the business model. Additionally a franchise owner must follow the business plan exactly as it is. If any changes are to be made they must first be approved by the head office.
It is assumed that with a franchise you will get a lot of support and a readymade plan to follow. However, some franchises are more proficient than others at assisting their franchisees in their pursuit of becoming successful. Marketing fees are also paid by most all franchisees to the franchisor. That’s because the franchisor is marketing and advertising the product/service to the benefit of all franchisees and they pay either a yearly fee or a percentage of revenue towards that expense.
Let’s look at a licensed business model.
A licensed business model opportunity is based upon a different legal and operational foundation. However, in many respects it’s not substantially unlike a franchise in its final objective. One critically substantial deference is that a licensed business does not require royalties nor does it require that you pass off all decisions to the parent company. A licensed business opportunity is generally significantly more affordable than a franchise. That’s because the license is all that is purchased, not the entire business model so there are no mandatory franchise fees, marketing fees, or royalties to pay. Most licensed business opportunities also do not require marketing fees. Many have graphics that may be used with instructions, but no set marketing fee that must be paid. The license business opportunity affords the licensee significantly greater autonomy and developmental freedom. This is often found to be a more attractive relationship for entrepreneurs with greater prior business experience.
As you can see franchises and licensed business opportunities are really not the same thing at all. They both offer the individual an opportunity at a new business strengthened by a support structure. But, the way that business is managed and the fees that must be paid in association with the new business are significantly and often substantially different. One must remain objective and realize that there are inherent benefits and drawbacks associated with both franchises and licensed business model opportunities. You must ascertain the advantages and disadvantages that most impact upon your short and long term objectives. Your decision to go ahead with any particular franchise or licensed business opportunity; whether it be ours or some other should be based upon the accumulation of as much relavent knowledge as you can collect.