Having reviewed the risks and challenges that the licensing and franchising industry faces, a new business entrant should be able to visualise which is a better option among the two, licensing or franchising , weighing the ups and downs of both business types.
For entrepreneurs who want to start their venture and wish to grow in the shadow of an already established name, both licensing and franchising are options. In a way, both franchising and licensing routes not only facilitate a company to earn additional revenues by helping others replicate their success but also allow them to gain the benefit of additional customer base and needed focus as a result of brands and products which people recognise. The demarcation between licensing and franchising is not very clear, and is a debatable issue.
However, not all businesses are cut out for licensing and franchising in terms of viability and profitability. Both licensing and franchising call for different degree of efforts and involvement from the company you license from or acquire the franchise, and we may find some businesses more suited to licensing and franchising compared to others.
While both licensing and franchising are lines of businesses calculated to run on an already well established brand or franchise, a licensor just gets certain limited rights to use a brand and has to put in great efforts in developing its own marketing and business plans in order to propagate the brand in the market in relation to the goods and services the licensed brand is being used.
On the other hand, a franchise serves as a complete business solution package, wherein the franchise is wellknown and established and also comes with a comprehensive sales and marketing strategy. The franchisee also at the same time enjoys the back up and continuous assistance provided by the franchisor in running the business, minimising the time and efforts required by an entrepreneur entering the business, making franchising the preferred business option.
Analysing most suitable businesses for licensing and as also discussed in the third part of our series in the March issue of Asia IP, the industry trend reveals brand licensing as being on the top of the pyramid and among the hottest businesses in this area.
However, no matter how successful your business is, it will not work unless it appears to be a good business opportunity along with being easy to operate, with minimum hassles and efforts, and it is here that franchising outsmarts licensing.
Let us take a look at the businesses which have proved to be successful within the franchising framework. Market study reveals that the businesses which are easy to replicate over and over again at new locations by new people and easy to operate with fewer technical issues involved are the ones which are capable of being run successfully. New entrants in the franchising business desire less legal hassles and easy to operate business with set running patterns for almost instant success.
A franchisable business should have a few prerequisites for being considered as a potential business opportunity. These attributes may include but not be limited to the business being a stable and established along with being easy to understand and operate.
A franchise should be able to offer a unique concept which is easily saleable, such as a new kind of fast food, and which has gained consumer acceptance and credibility being marketable at the same time.
It is much easier to market a franchise with built-in appeal and excitement than the one that sounds like routine business. It is also imperative that a franchise should produce a superior product or service and be able to maintain the high quality standards to capture the imagination of consumers. Geographical considerations i.e., whether the idea would be equally successful in different geographical areas and can be repeated across boundaries, is another factor making a franchise successful. A franchise which fulfills these requirements can make for a successful business opportunity.
If we look around, we would not fail to notice that the most prominent establishments which one bumps into at every shopping mall are all being run through franchising and licensing networks.
Much of the appeal of a franchise system to consumers lies in the fact that, no matter where they go, if they like one of the franchises, they will get the same quality of service and goods they would get anywhere else. No wonder we can enjoy a Mcburger literally any place we go.
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Region, India
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