First lets look at the definition of franchising:

Franchising is defined as "a method of doing business by which a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor and which is substantially associated with the franchisor's trade mark, name, logo or advertising."

What this means is there are 3 core elements that determine what is a franchise:
1) Use of a name
2) Use of a system
3) Payment of fees.

Business format licensing occurs when only two of these elements are present in the relationship: use of a system and payment of fees. Business opportunities tend to cost less for an investor to get into, usually less than $5,000 to start. Franchises charge higher initial fees, usually anywhere from $15,000- $40,000 to start. However with a franchise, there is more controls, royalties, and support.

Ultimately, the decision regarding whether to franchise or license has more to do with your goals for the business than anything else and boils down to the question of "control"-How much control do you want to have over your company name? Is it important that you build consumer awareness with common logos, advertising, and the like?

Also, how important is the system that owner/operators will need to follow?

How critical is consistency from one location to another?

Depending on how you answer these questions, you may be able to figure out the issue of licensing vs. franchising for yourself.

And of course, if you need additional help or want further clarification, we're here to help you. Because the circumstances of each and every business is different, our franchise analysts and senior consultants can provide you with a much more definitive answer, once we understand your business and what you are interested in accomplishing. We also conduct seminars on these very issues to shed light on franchising and the pro's and con's for a business.