Understanding the licensing and franchising meaning is important if you want to grow your business. Basically, franchising means that you're allowing another person to duplicate your business in another location, and licensing is when you allow someone else to sell your products. With both licensing and franchising, you will receive a fee from the person duplicating your business or selling your product.

Licensing:

Licensing is an agreement between two parties, a licensor and a licensee. The licensor, who owns a piece of intellectual property, allows the licensee to use this property in exchange for a licensing fee.

Licensing fees can come in several forms:

• Lump sums.
• Continuing royalties.
• A percentage of what the licensee makes using the intellectual properties.

One of the main goals of companies is to create items that they can license to individuals and businesses.

Businesses can benefit from licensing in a variety of ways:

• Improving their market share.
• Shaping customer preferences and developing loyalty to the business's brand.
• Optimizing exposure.
• Generating revenue.

Franchising:

Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees). If buying an existing business doesn't sound right for you but starting from scratch sounds a bit intimidating, you could be suited for franchise ownership. Franchises are an extremely common way of doing business. Examples of well-known franchise business models include McDonalds, Subway, UPS, and H & R Block.

An entrepreneur that opens a franchise can receive multiple benefits not available when starting a new business:

• Instant recognition with customers.
• Already-established employee training.
• Built-in support for marketing and advertising.

Large companies are commonly both licensees and franchisors.

Question to Consider: 

1. Why Choose Licensing and Franchising?
2. What Is a Franchise Business?