Licence v franchise – what’s the difference?

Ensuring Corporate Documents' Enforceability - What to Know

29/05/2023

Two of the most common types of businesses in Australia are licensed businesses and a franchised business. But what’s the difference?

Both models are business agreements in which certain aspects of the brand are shared in exchange for a fee

However, a franchising agreement covers a business’s entire brand and operations, while a licensing agreement only applies to registered trademarks.

A common arrangement is an intellectual property licence, which could cover several aspects of the business including: 

  • brand
  • logo
  • trademark
  • copyright

In a franchise agreement, the franchisor has a lot more control over the franchisee. This could cover detailed directions on marketing, and how the business runs. Franchise agreements also charge an initial fee, as well as ongoing royalty fees.

There are generally no set restrictions on how a licensee may operate their business, as long as the licensee does not cause harm to the reputation of the licensor or its branding. 

A franchise:

  • has a uniform marketing plan.
  • Franchisor decides the location, fit out and systems for operating the business.
  • Franchisor has performance criteria for each of their franchisees.
  • Franchisees also regularly pay fees including towards a marketing fund, royalties and other ongoing fees.

A licence:

  • Licensees determine their own marketing plan. 
  • Licensees can develop their own systems for operating their business and have the flexibility to use the licensed IP alongside their own IP.
  • Little to no requirement to comply with particular criteria.
  • Licensees pay specific fees, generally not including a marketing fund.
  • Licensees use a specific item of intellectual property from the licensor, such as only the software, templated documents, or trademarks.

When signing up for a business agreement, it’s vital you have all the information you need. 

Each structure offers inherent advantages and disadvantages, and you need legal advice ensure you’re making the right decision for you and your future.

Here at GLG Legal, our corporate law specialists are here to help you navigate the ins and outs of business, franchising, and licensing agreements.

Contact our office today at (07) 3161 9555 to make an appointment.

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