How is a franchise different from a management contract
Franchise vs License | What is the Difference?
[Music]
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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