Licensing vs. Franchising vs. Individual Ownership
What is the difference between licensing and franchising and which one is right for me?
LICENSING
Licensing allows a licensor to grant permission to an individual or a group to distribute products and/or services under the licensor’s registered trademark. The licensee may use the product or services without fear of infringement against them by the licensor. Although licensing seems like a good option when starting your own business, it may not be the best option for a first time business owner or someone who would like guidance and support after their business is opened.
A company supplying a license to an individual will usually charge a hefty up front licensing fee and legally cannot provide a system and a brand recognized logo. Within that fee you are then allowed to use two of the three basic parts of a business: the brand name or the systems, because the licensing fee is already being charged. After charging that upfront fee the licensor will have already made their profit and have no interest in the future of the licensee’s new business and cannot control the systems for consistency. The licensee will receive minimal help from the licensing company, because they have little vested interest in the new business.
FRANCHISING
Franchising is the right granted by a company to an individual or group to market its products and services in a specific territory. A company offering a franchise will charge a small one time franchise fee and then charge a small percentage of the franchisees sales. With a franchise the overall fees will be paid over a long period of time, providing the franchisee with a better chance of profiting over time, since they won’t start out in extreme debt. The franchisee is required to use the business systems, products, services, and product pricing of the franchising company.
Within the franchise the franchisee will receive all of the training necessary to orchestrate a successful business. The franchisor will want to ensure great sales and success of the Better Buzz franchisee, since the franchisor is receiving a monthly franchise royalty. The franchisee will never be alone in any aspect of their business, as they will be guided by team members at the Better Buzz Coffee headquarters.
Having a nationally known franchise or a national brand behind your company provides you with constant advertising and promotion for your personal store. They will receive free advertisements from headquarters as well as information on all specials and marketing plans each month from the marketing team at our headquarters. A franchisee knows that another franchisee will not harm their business due to poor service or quality because every franchisee is required to use the same systems. Service standards, menus, drink and food preparation is consistent throughout the company. Also provided by a franchisor, unlike a licensor, is location selection, store design, construction programs, professional consulting, and tips from a network of other franchisees that have used the systems of the franchisor and found success for themselves.
Why do I need either one of these? Why not start my own business from scratch?
While starting your own business may seem beneficial since you don’t have an upfront franchise fee it may cause more grief than relief. Starting a business is not an easy task, and why try to re-invent the wheel when there is already a system that works. You will have to find a location, negotiate the lease, create the business plans, build your own business systems, and you’ll have to do all of this hoping that it will return great results. Not to mention that you will have to develop a loyal customer base on your own and market your new company effectively which will be extremely costly in the areas of time, money, effort, and resources.
With a franchise you will have the benefit of purchasing power, so your cost of goods and products should be less than if your business were individually owned. First impressions are everything; don’t throw your hard earned investment down the drain by paying the guessing game with important decisions and systems regarding your business. Take advantage of the millions of hours we have spent, and the challenges we have already solved by using our guidance and support in opening your future Better Buzz Coffee franchise.
