The Differences Between Dealers, Licensees and Franchises

By Kelly MangumNovember 15, 2018

Licensing Agreement, Dealership, or Franchise Ownership?

When you want to expand your business, you do not need to do it all by yourself. Instead, you can partner with other companies or people. Franchising means that you can give authority to another person to open a shop using your name or logo. So, your brand gets to be known in every town that has got a store with your trademark. A licensing agreement on the other hand permits smaller companies rights to use popular brands to boost sales. Let’s understand what makes dealerships, licenses and franchises different better below.

FranchisesLicensing Agreement

Partnerships in business are very crucial to its growth. If you enter into a franchise partnership with a person or company, it means that you will contract them to use your brand and get support services and supplies from you. The brand owner (franchisor) gets to have their name promoted and business enlarged throughout the places that have a store bearing their name. As well, the franchisee (party that uses franchisor’s brand) earns the respect that the mother country has throughout the world. Part of the franchisee’s profits go to franchisor.

The franchise has quite a lot of responsibilities. First, they have to maintain the brand quality as part of the contract. Also, their products should be similar to what the mother company gives but there may be a few changes to adapt to the current market. Again, they are responsible for furnishing and maintaining the store to the standards of the parent company. In short, the franchisee’s store is operated just as the main franchisor’s company.

The three main types of franchise are; the product franchise, system franchise and manufacturing franchise. The product franchises act as outlets for specific products. These include Ford Motors and Coca-Cola.

The system franchise has permission to do business in accordance to a system that has been set by the franchisor. These include the Hilton Hotels and the American Idol.

The process manufacture type is whereby a franchisor is responsible for giving a special critical ingredient or support and aptitude in the production. Examples include KFC, and McDonald’s.

Licensees

Every brand is patented by the law for the services they do, their logo and name. However, some companies do license other parties to use their patents for a fee. This mostly works for a company that wants to promote its services using the name of another producer. Without the license, such a business would be considered illegal and a bleach of patent laws. So, both companies enter into a contract where the licensor gives rights to the licensee at a fee. Examples of situations that require licensing include the use of patented brands, software, technologies and databases.

Probably, the king of licensing in the business world is Disney. It is a company that gives its brand to several companies that offer shirts, cereals, electronics, toddler supplies and books. This explains why you find their name on a large number of products. In return, Disney gets a huge fee.

Responsibilities are light for the licensor, and once the contract is signed, the licensee is on their own. The licensee aims at getting more buyers by using popular brand names.

Dealers

A dealer is a company or a person that works as a retail distributor. In short, they have been contracted by a party to sell products to the public. In most cases, they have the logo and brand name of the parent company and offer the exact products produced in those companies. They do not make products of their own but instead help in the sale and distribution of goods and services from another organization.

Dealers are part of a branded company’s marketing scheme. Dealerships bear the trademarks of the producer. They enjoy the advertising exploits from their parent companies and also receive training as well as all the necessary incentives. They benefit from earning commissions and profits resulting from haggling prices. Dealerships are mostly common in the motor industry. Different auto makers around the globe contract dealers to assist in the sale of vehicles in different towns.

In brief, licensing is quite different from dealerships and franchising. The three are part of a company’s efforts to promote their brand or sell their products. If you want to expand your business but you do not have the needed capital, you can sign a franchise contract with partners. Licensing gives smaller companies the rights to use the brands of large organizations and thus increase sales. Dealers get free training and promotion from the parent organization while the brand owner benefits from the distribution of its products.

About the Author - Kelly Mangum

Director of Marketing at Franchise.com & Franchise Solutions. Experienced at lead generation & project management. Mama of 2, wife, runner, gardener, living just outside of Portsmouth, NH.
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