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WHAT IS FRANCHISING?
In simple terms, franchising offers someone who wants to start their own business, a fully formed, and proven operational model and structure to follow, with a good level of initial and ongoing support and training, which covers every part of running a business like marketing, sales, financial, operational and staffing. Usually franchisees are granted an exclusive territory to operate in.
In return the franchisor receives an initial franchise fee, and then ongoing monthly fees, usually under a minimum 5 year franchise agreement term.
The franchisor retains the control and upper hand and therefore can grow nationally, and even internationally with strong and consistent brand presence.
WHAT IS LICENSING?
Licensing is similar to franchising but the key difference is that the licensor has much less control over how a licensee operates and represents the brand.
The investment level is usually much lower, and not much training and support is usually offered. Often ongoing fees payable are taken as a percentage of exclusive products purchased by the licensee from the licensor.
Agreements are often shorter in length and licensors have to very much rely on finding the right person as their success depends on that person being able to set up their own successful business model and way of operating, as this structure is not provided by the franchisor.