Licensing On a Company’s Behalf Vs. a Business Franchise Format

John Pratt writes:

The difference can be a lot - or not much. A big element of any franchise is the licensing of the franchisor’s brand to a franchisee, as well as the franchisor’s know-how and systems, so in that sense a licence and a franchise are very similar.

However - and this is the crucial difference - when you’re granted a licence you don’t know whether the licensor has effectively tried and tested the elements being licensed to you to ensure you can operate a successful and profitable business using them.

In a franchise the opposite is, or should be, true. The whole point about franchising is that you’re not simply being licensed with elements necessary for your business but, in addition, you have the comfort of knowing the franchisor has established that when using its brand, know-how and system you can operate a successful business.

You know this because the franchisor has operated its own business, then tested it by operating a pilot franchisee to establish that a third party following the franchisor’s systems can be successful.

John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.