What’s the difference between a franchise and a license agreement?

A licence is often confused with a franchise, as central to every franchise is a licence to use a trade mark or trade name and other intellectual property rights. A licence is the right granted by an owner of a trade mark, logo, patent or other intellectual property right to another person to reproduce that mark, logo or patent, etc often in relation to the manufacturing or production of products such as in character merchandising. There will be quality controls imposed on the licensee, who will pay the licensor a royalty for using the intellectual property right.The expression ‘franchise’ is now popularly used to describe all those transactions in which one person permits another to do something with its intellectual property rights. For example, petrol filling stations, car dealerships and use of a sportsman or entertainer’s name are commonly called franchises.These should be distinguished from a ‘business format franchise’, which is the main type of franchise involving the total business concept. A business format franchise involves not merely the licence of a trade mark in relation to goods and services, but the preparation of a blueprint for a successful way of carrying on a business. The blueprint should eliminate so far as possible the risk inherent in opening a new business. The blueprint should also enable a person who has never before opened or operated a business to open up on his own account, as well as setting out in detail exactly how the business should be run, and provide initial and ongoing training, advice and assistance to the franchisee. The business format franchise is a comprehensive and continuing relationship in which the initial concept is always being developed.