What is a franchise and a licence?

grants a right to another person, the franchisee, to use a distinguishing trade mark or trade name in connection with the supply of goods and services by the franchisee and requires the franchisee to conduct its business in accordance with prescribed operating methods and procedures developed and typically controlled by the franchisor. Generally, an up front fee is payable by the franchisee upon the initial grant of the franchise, and the franchisee’s business makes extensive use of the franchisor’s know-how and expertise. The franchisor maintains a continuing interest in the franchisee’s business by advising and providing on going assistance and expertise and by monitoring compliance by the franchisee with common standards and operating techniques required by the franchisor. The franchisor has a continuing right to receive compensation from the franchisee through fees or lease payments, or by its sale of products to the franchisee for resale.

Franchising arrangements can take many different forms, from master franchising relationships whereby a person or corporation is granted the right to carry on the franchised business and operate multiple outlets within a designated territory, to simple franchise agreements which grant the right to operate a single outlet at a designated location.

A licence is a contractual arrangement whereby the owner of a patent, trade mark,copyright, know-how or technical data grants to another the right to use such property for an upfront fee and/or an ongoing royalty fee, but in circumstances where the licensor has little or no control over the licensee’s business. Licensees and franchisees are independent contractors, not employees. As such, they normally have greater freedom of action than an employee. A key distinction between a franchisee and a licensee is the greater ongoing involvement and control exercised by a franchisor in the business of a franchisee, compared to that exercised by a licensor in the business of a licensee.