Franchising Business Model and Licensing Business Model and Its Difference

The companies are worried that how to promote and expand their business. What steps should be taken to increase the progress of the company? Every owner of the company has to make its company’s progress compatible with the market and it should compete with other’s company. To increase the progress of your business there are two business models; franchise business model and license business model.

What is a Franchise Business Model?

The franchise business model is the most popular development called now a day. Its prove itself to make the record success and provides easiness for people to become a franchise owner. Basically franchise business is the communication between two parties (buyer and seller) on a trade or business.
Benefits of franchise business model:

There are many benefits in franchise business for both seller and buyer. In the franchise business, the people has the ability to use other money to start his business and promote the brand rapidly through investors. The fees and royalties are used to build the brand. advertise it and promote it in the marketplace. The Subway and Macdonald’s are the two best example of franchise business model. The Subway is the most famous example of the franchise model. It’s popular because of its sandwich art that makes the good impact on customers. The Subway business includes five points.

The Subway business includes five points.

• The location for the shop and its advantages.
• The list of different competitors who are already working.
• The flaws in your marketing strategy
• The financial needs to be analyzed
• The timeline that shows opening and growth of business.

The capital required franchising a Business

The capital to franchise a franchising company is greatly huge, you need a considerable enough amount of money for you to start. It could reach to $1.5 million to $2.5 million investment with some liquid capital. Once the business is running it would expect to generate a profit after approximately 5 years.

What is License Business Model?

The license business model protects and develops your business without finance. To make you brand faster in the market you have the choice of selecting an experienced company for commercialization. If you are the first developer and you don’t want to care about how to commercialized your business, then the licenses model is the best choice for you.

In license model, your main focus should be on commercialization your property. The best way to commercialize is that it could be licensed for a start-up. In licensing model it’s the responsibility of the licensor for manufacturing, sales, and distribution and has the right to take losses and profits. The inventor or owner only receives the royalty either the license is successful or not. The basis for the licensing model is the license agreement in which inventor transferred their intellectual property to their licensors. The example of this model is Digital Altitude L.L.C. with Aspire System.


Visit their website for more:

Benefits of license business model:

The advantage of licensing is that in marketing the power has given to the license’s products. The brand managers who are new and bring their products via licensing they having the opportunity for growing their company. The process of the licensed product is:

• The product which is to be licensed will be choose
• The license can be negotiating with the best licenses
• The responsibility of the licensor is to develop concepts and final production samples for approval
• The product which is licensed approved are for sale
• The licensor sells licensed product to authorized retailers.
• The licensor will not create the product.
• The licensor immediately can sell the licensed product.

The capital required for licensing a business

In this kind of business model, it’s pretty much cheaper to start a licensing business. It could only cost to $1,000 thousand to $20, 000 thousand so it’s immensely affordable. Even for those entrepreneurs who has a low budget and can’t afford the high amount of investment then licensing business model could be the best alternative. Affordable to everyone from the corporate world who would want to venture into business and planning for retirement.

The sample of this is the Digital Altitude with Aspire System which has a low-cost start-up. You may visit the website and see for yourself.


Comparison of both:

Franchise Business ModelLicensing Business Model
The franchise model helps the things like branding and marketing which support and aid the franchise. In the license model licenses have been sold between companies to use their business programs.
In this the franchiser has to maintains its control over the operations and process used by franchisee.The licensing company has the right to control over the brand design but does not control the business operations.
This model is based on certain securities rules.It has the contract law.
It requires the investment to expand the business.It does not require any investment in expanding the business.
It has manual comprehensive work and maintenance the programs manually.This requires the law and rights which specify the license.
The franchising is costly and it has the requirement of payment on future sales.This requires low cost and has to future payments excluding purchasing products.
They give support to their franchisors. Like they give business management training.They also offer training on how to expand and attract visitors to the business.

So, both are profitable but it differs on the start up cost and the span of making a profit. In the whole picture, they are all the same business. May one of you will decide which best business model you are going to start.

If you learned reading this blog post you may write your suggestion and ideas on the comment box below.



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