International franchising and licensing allow companies to effectively use their capital, brand and related intellectual property (including trademarks, patents, know-how, and business and marketing systems) in exchange for royalties and/or product sales.
What is licensing franchising?
Licensing Franchising Franchising is an arrangement in which the franchisor permits franchisee to use business model or brand name for a fee, to conduct business, as an independent branch of the parent company (franchisor). Franchising regulations or Company Law as the case may be. Mandatory Provided
What is international licensing?
Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property ( Patents, trade marks etc). 1. International Business 2.
What are the advantages and disadvantages of international licensing and franchising?
It can be a disadvantage or advantage for franchisee, because the product has a worldwide reputation which is an advantage and it also can be a limit which is a disadvantage for franchisee. These forms can bring a success to the companies but disadvantages of international licensing and franchising are undeniable.
What is a license agreement in business?
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.
What is international licensing and franchising?
Franchises and licenses are both business agreements in which certain brand aspects are shared in exchange for a fee. However, a franchising agreement pertains to a business's entire brand and operations, while a licensing agreement only applies to registered trademarks.
What is licensing in international business?
International licensing: International licensing gives a foreign business entity the right to manufacture or use a company's product for its market. While there are many benefits to international licensing for IP owners, there may also be obstacles exclusive to foreign territories, such as quotas or tariffs.
What is franchising in international business?
Franchising is the practice of licensing another firm's business model as an operator. Franchising is the practice of using another firm's successful business model. For the franchiser, the franchise is an alternative to building “chain stores” to distribute goods that avoids the investments and liability of a chain.
What is the meaning of licensing in business?
Licensing Definition: A business arrangement in which one company gives another company permission to manufacture its product for a specified payment. There are few faster or more profitable ways to grow your business than by licensing patents, trademarks, copyrights, designs, and other intellectual property to others.
What is licensing and its examples?
Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company. Some examples of things that may be licensed include songs, sports team logos, intellectual property, software, and technology.
What are the similarities between franchising and licensing?
Is franchising a form of licensing? Franchising and licensing are two different business models. However, both models involve you allowing another individual to use your intellectual property, such as your brand name, in exchange for payment.
What is franchising and its example?
Franchising is a business relationship between two entities wherein one party allows another to sell its products and intellectual property. For example, several fast food chains like Dominos and McDonalds operate in India through franchising.
What are the 4 types of franchising?
The four types of franchise business you can invest inJob or operator franchise. These owner operator franchises are usually home based, which keeps overheads down to a minimum. ... Management franchise. ... Retail and fast food franchises. ... Investment franchise.
What is franchising and its benefits?
Franchise systems can offer purchasing efficiencies through economies of scale. Some or all of the needed products will be offered by either the franchisor or trusted suppliers. Franchisees can often take advantage of bulk discounts as well. Advertising and marketing assistance.
What is the difference between franchise and license?
Ownership: In a franchise partnership, the business belongs to the franchisee. The franchisee essentially runs the business for the franchisor, but at a fee. In a licensing partnership, the licensee only pays the licensor for a specific product, for which the licensor may have taken out patent rights.
Why is licensing important?
Importance of Licensure. Professional licensure protects the public by enforcing standards that restrict practice to qualified individuals who have met specific qualifications in education, work experience, and exams.
What is licensing and franchising Class 11?
(ii) Licensing means permitting other party in a foreign country to produce and sell goods under trademark, patents whereas franchising means sell or distribute the branded products in a specific geographical area, e.g., through its franchising system McDonalds operates first food restaurants in the whole world.
Why is licensing important?
Importance of Licensure. Professional licensure protects the public by enforcing standards that restrict practice to qualified individuals who have met specific qualifications in education, work experience, and exams.
What is licensing and its advantages and disadvantages?
Advantages and Disadvantages of LicensingAdvantages to LicensingDisadvantages to LicensingYou will not need to incur the costs of producing, promoting, packaging, or selling your product.You will likely lose control over your product, including promotion, packaging, and selling.2 more rows
What means product licensing?
A product (or merchandise) license allows licensees to leverage popular IP to create branded products, usually for a specific period of time. Once the rights have been secured, the licensee manufactures product using the licensed IP, and in return pays the licensor a royalty for its use.
What is licensing in global strategic management?
Licensing is giving legal rights to in-market parties to use your company's name and other intellectual property. Any licensee can produce and sell products under your name or offer services using your brand.
What is franchising and licensing?
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.
What are the benefits of licensing and franchising?
Benefits of Franchising and Licensing. Franchising and licensing both provide enticing benefits to businesses. For instance, with these tools, you can access multiple revenue streams with almost no underlying costs, making it much easier for you to increase your business income.
What Is Franchising?
With franchising, you, the franchisor, allow another person, the franchisee, to open and operate a branch of your business in exchange for a fee. After paying this fee, the franchisee has your permission to duplicate your entire business operations.
Why is it important to license a product?
For example, when you license your product, you can increase its exposure, and your licensee will be able to sell a product without worrying about designing and manufacturing. Licensing and franchising can help you break into new markets that you may not have been able to access otherwise.
What is a license agreement?
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.
Why is franchising important?
Expanding your market is the biggest benefit of franchising and licensing, and with these arrangements, you may be able to generate more revenue. Both business owners and people that want to break into a profitable market can benefit from franchising and licensing.
How can a business benefit from licensing?
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. A business that licenses another business's intellectual property is known as a licensee.
What is the difference between franchising and licensing?
The difference between licensing and franchising can be drawn clearly on the following grounds: 1 Licensing is an arrangement in which a company (licensor) sells the right to use intellectual property, or produce a company’s product to the licensee, for a negotiated fee i.e. royalty. Franchising is an arrangement in which the franchisor permits the franchisee to use business model, brand name or process for a fee, to conduct business, as an independent branch of the parent company (franchisor). 2 Contract Law governs, licensing whereas franchising is regulated, franchising regulations in many countries, but in case the franchising regulations are not in place then the company law regulates. 3 Licensing does not require registration, whereas registration is a must in the case of franchising. 4 In franchising, complete training and support are provided by the franchisor to franchisee which is absent in licensing. 5 The licensor has control on the use of intellectual property by the licensee but has no control over the licensee’s business. However, the franchisor exerts considerable control over franchisee’s business and process. 6 In licensing, there is a one-time transfer of property or rights, but in franchising involves the ongoing assistance of franchiser. 7 A substantial measure of fee negotiation is there in licensing. Conversely, standard fee structure exists in franchising.
Why is franchising more stringent than licensing?
in general franchising is comparatively stringent than licensing because usually, franchisers set strict rules, regarding the operation of the business by the franchisee.
What is franchising strategy?
We define franchising as a strategy mainly used by service companies, that allows the franchisee to use a business model, processes or brand name for a fee, to conduct business, as an independent branch of the parent company (franchisor).
What are the advantages of licensing?
The greatest advantage of licensing model is that the licensee bears the developmental cost and the risk associated with launching foreign operations. In the sphere of high technology, many companies provide technical know-how through this arrangement like Ranbaxy Laboratories Ltd. is in search of partners, for out-licensing its diverse technologies such as respiratory, urology, etc. However, sharing technological know-how with foreign companies is a bit riskier for technology-based companies.
What does a licensor do?
The licensor has control on the use of intellectual property by the licensee, but has no control on the licensee's business. Franchisor exerts considerable control over franchisee's business and process. Involves one time transfer of property or rights. Needs ongoing assistance of franchiser.
What is licensing in business?
Meaning. Licensing is an arrangement in which a company (licensor) sells the right to use intellectual property or produce a company's product to the licensee, for royalty.
How to enter a foreign market?
The five major ways of entering a foreign market are exporting, licensing, franchising, forming joint ventures or establishing a wholly owned subsidiary.
What is international licensing?
Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property ( Patents, trade marks etc).
What is franchising in business?
6. Franchising Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.
What are the advantages of franchise?
Advantages of Franchising Owning a franchise allows an individual to be self-employed while also investing in a proven system with training and support. It brings a ready-made customer base and often comes with client listings. There is a reduced risk of failure, on-going research and develop, and a semi- Monopoly in a certain territory.
What are the drawbacks of licensing?
Licensing The major drawback of licensing is the problem of controlling the licensee due to the absence of direct commitment from the international firm granting the licence. After few years, once the know-how is transferred, there is a risk that the foreign firm may begin to act on its own and the international firm may therefore lose that market.
What is a franchising?
Franchising was defined by the European Union as ‘a gathering of industrial or intellectual property rights relative to trademark, commercial denominations, insignia, utility models, designs, copyrights, know-how, or patents to be utilised for the resale of goods or services to a final user.’ .
What is franchising agreement?
Generally, a franchising agreement includes a license of trademark right, know-how, copyright and some instructions about store such as decor, floor plan designs. [15] .
What are the advantages of franchising?
The principal advantages of international franchising are: (i) Franchising is a beneficial way to make a profit, generate an income and extend the reputation by granting distributorships all around the world, (ii) The franchisor entitled to check quality of services in store or shop according to franchising agreement,
What are the disadvantages of international franchising?
Beyond these advantages, the disadvantages of international franchising as follows: (i) Specified products can be subject of the franchising agreement and it will be a limit for franchisee, (ii) It can be risky for franchisee to enter into a franchising agreement that releases product or service which have not been proven, ...
Why did Porelon terminate its license?
After that, MU got exclusive rights to import and develop the prelinked hand-stamp technology into China, Porelon decided to terminate the exclusive license with FCH, because of the sales, quality and improper use of the name Johnson Wax. After receiving a letter about termination from Porelon, FCH sued for damages resulting from the interruptions of its business and for lost profits from the wrongful termination of the license. It seems that, because of the limited royalty, Porelon tried to find another way to make more profit. However, in general Porelon has entered in a Chinese market with international licensing which is an advantage for Porelon.
What is it called when a company enters a foreign market?
Entering a foreign market including the licensor and the licensee is called licensing . In international licensing agreement, the licensee will have a right to use licensor’s intellectual property for a particular time in agreed territory, which is outside the licensor’s country, in return for an agreed fee or royalty. [3] In other words, the sale of intellectual property is not a subject of a licensing agreement. [4] Patent, designs, trademark and copyright might a subject of the licensing agreement as industrial property, in some cases, trade secrets can be included. [5] In certain agreements, companies might also provide physical components with intellectual property rights for manufacturing in a foreign country. [6] In addition to this, joint venture or investment agreement might include the licensing terms, because technical assistance and knowhow will be required when the operations proceed. [7]
What is international business?
International business was defined as ‘any business activity organised and carried out across national borders by business firms in pursuit of their stated aims and objectives’. The way to conduct a business in a foreign market is possible with contractual methods that become international. #licensing #franchising
What is franchising in business?
Franchising is basically a specialized form of licensing in which the franchiser not only sells the intangible property to the franchisee but also insists that the franchisee agrees to abide by strict rules as to how it does business. The franchiser supplies the main part of the product and provides the following services to the franchisee: trade Marks, Operating Systems, Product and Brand Name. Company support systems like advertising, training of employees, quality assurance are also involved in franchising Licensing works well for manufacturing companies but franchising is a better option for international expansion efforts of service or retailing companies. Franchising has the same advantages as licensing. The franchisee bears almost all the costs and risks in establishing foreign operations. The franchiser’s contribution is limited to providing the concept, technology and training the franchisee in the already established model. Maintaining quality poses the biggest challenge to the franchiser. McDonald’s, Domino’s, KFC use franchising model.
What is a license agreement?
A licensing is an agreement whereby a licensor grants the rights to intangible property (patents, inventions, formulas, processes, designs, copyrights, and trademarks) to another entity (licensee) for a specified period and in return, the licensor receives a royalty/fee from the licensee. Licensing specifies the territory as well as period. The licensor gives such permission after establishing such a command-able position globally. For example, British American Tobacco Company (BATS) has given licenses in many countries for the manufacture of their brand of cigarettes “555”. In India, ITC is the licensed producer of “555”. A domestic company can license foreign firms to use the company’s technology or products and distribute the company’s product. By licensing, the domestic company need not bear any costs and risks of entering foreign markets on its own, yet it is able to generate income from royalties. The returns to licensor are comparatively low. The drawback of this arrangement is the risk of providing valuable technological knowledge to foreign companies and thereby losing some degree of control over its use. Monitoring licenses and safeguarding the company’s Intellectual Property Rights can prove to be challenging in an international scenario.
Who bears the costs and risks of establishing foreign operations?
The franchisee bears almost all the costs and risks in establishing foreign operations. The franchiser’s contribution is limited to providing the concept, technology and training the franchisee in the already established model. Maintaining quality poses the biggest challenge to the franchiser.
What is subsidiary in business?
A subsidiary can be formed from scratch (greenfield investment) to manufacture and market its products and services in a foreign country. The parents have control through technology, manufacturing expertise, intellectual property rights, and brand name.
Why Choose Licensing and Franchising?
- Expanding your market is the biggest benefit of franchising and licensing, and with these arrangements, you may be able to generate more revenue. Both business owners and people that want to break into a profitable market can benefit from franchising and licensing. For example, when you license your product, you can increase its exposure, and your licensee will be able to s…
Basics of Licensing
- Licensing is an agreementbetween 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: 1. Lump sums. 2. Continuing royalties. 3. A percentage of what the licensee makes using the intellectual properties. One of the main goals o…
What Is Franchising?
- If you are the owner of a profitable brand name or business model, then you might want to consider franchising your business. With franchising, you, the franchisor, allow another person, the franchisee, to open and operate a branch of your businessin exchange for a fee. After paying this fee, the franchisee has your permission to duplicate your entire business operations. In gen…
Benefits of Franchising and Licensing
- Franchising and licensing both provide enticing benefits to businesses. For instance, with these tools, you can access multiple revenue streams with almost no underlying costs, making it much easier for you to increase your business income. With licensing and franchising, other people are marketing your business for you and paying you for this priv...