Which One Is Right for You?
Ask yourself a few key questions to understand which type of business arrangement is most appropriate for you:
- Do you find the securities laws that cover franchises to be burdensome?
- Are you looking for an easier entry into business, with fewer requirements? If so, a licensing agreement is typically much easier to finalize than a franchise agreement.
- Do you prefer a greater degree of control in managing your business? If so, licensing is again the better choice. If you like having many elements of your business pre-planned for you, head in the franchise direction.
Every business has its potential challenges. As you consider the difference between franchising and licensing, add up the pros and cons of your situation, goals, personality, and products. Also, remember to take into account the resources you have available when making your decision.
Licensees also enjoy lowered risk because they’re usually entering the marketplace with a known quantity and a built-in customer base. However, they enjoy a lot more freedom than franchisees.