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Question added to topic FranchisesFebruary 9, 2010

What is the difference between licensing and franchising?

What advantages does a business gain when they license instead of franchise? Recently, I contacted a business which I thought were into franchising, until I was corrected with the right term "licensing."
A franchise is a license, though you usually don't find someone so focused on language minutia that they make a big deal out of the distinction in the sense of business opportunities. The term "get a life" springs to mind as I read your account of them correcting you on this small matter.

A franchise is a license issued to someone to operate a business using a common brand name, a common operating support system and involving the payment of initial and/or ongoing fees.

If the company you were talking to has those three components as part of their offering, then they are in fact offering a franchise, whether or not they choose to call it a license.

There are also many types of licenses that are not franchises. For example, when you buy a copy of Microsoft Office you are not actually purchasing Office--you are entering into a license agreement that allows you to use the product under the specified terms and conditions they have outlined in the license agreement (all that fine print that no one reads).

There are business opportunities that are not franchises, though I don't know of any bizopps that label their opportunity as a license. Business opportunities are like franchises except that they are missing one of the three necessary ingredients mentioned above--typically a common brand.

If the person you were dealing with meant to say that they were a business opportunity rather than a franchise, they need to go back to hair splitting school to learn some new terminology.

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.

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