Franchise vs License | What is the Difference?


what is up you guys welcome back to

business buzz where we focus on business

entrepreneurship and investing today

we're gonna be talking about the

differences between franchising and

licensing these are two great ways to

make money but you might be confused on

the terms and exactly what they mean

guys before we get into the meat of the

video make sure you guys leave us a like

first let's talk about franchising a

franchise is basically an extension of

an already existing brand or business

like McDonald's so ik Donald's is a

great example of a franchising company

when you purchase a franchise you now

own the right to operate under their

brand but you do have to pay certain

fees and licenses also as a franchisee

you're now gonna have proprietary

information of the company whether it's

a secret ingredient or any sort of way

that they were on the company to make it

more efficient anything you now have

that information so basically here's an

example of how franchises work basically

let's take McDonald's for example they

basically buy up the land and they run

it out to franchisees where you now

basically own the business and you get a

certain percentage of all the revenue

completed through that business now

let's go into licensing licensing is a

legal agreement to where you get the

right to use their trademark but you do

have to pay a legal fee this is how

Disney makes a lot of their money they

basically license all of their

characters so Disney actually doesn't

own a lot of their own characters they

license them so basically if they want

to use let's say Cinderella in a movie I

don't know if Disney actually owns them

or not but let's say they use Cinderella

in a movie they get the majority of the

money but they do have to pay a little

fee to the person who actually owns the

character of Cinderella also you know

t-shirt brands might do similar things

with licensing they might license out

their brand their logo to a retailer and

the retailer can use that and some

products where then the company who sent

out the license gets a certain

percentage of the money made on those

license products the royalty fees for

licensing are typically 5% were lower

so to recap franchising is basically

where you're already taking a successful

company you own

small piece of it well you don't really

own it but you can profit from it you

just kind of run it keep it going and

make money from that get your little

percentage now of course it's a

franchisee you are gonna have to follow

a certain protocol you don't have full

control over your restaurant obviously

you're gonna have to serve certain items

and you're not gonna be allowed to serve

certain items and things like that so

guys that about wraps up this business

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