Franchising

People are familiar with franchising as a way to start a business, but not so many thoroughly understand an alternative form of starting a business with an already established brand—licensing.

Franchising is basically licensing “with stuff added into it.” Unlike franchising, licensing does not require uniformity or consistency in the appearance of the licensees’ work areas or stores. It is primarily concerned with the technology transfer aspect of the business. There are also less restrictions in a licensing agreement—some licensing agreements do not even have a restrictive clause. However, intellectual property protections still apply in licensing agreements.

So, before you decide on whether you should go into franchising or licensing, answer our checklist below to find the most suitable mode of business for you.

If you decide to take the franchising route, look for the following qualifications in the franchisor:

•Does the franchisor use the product he sells? Example: Does he drink coffee if he is running a coffee franchise?

•Does he have managers knowledgeable in all business aspects, e.g. training, operations, and marketing?

•Does he have a supply chain?

•Are his franchisees happy? If you are the first franchisee, take extra care then.

•Does he know his business well enough to give you fingertip information, like average sales, source of his products, marketing plans, plans for the future?

If you decide to license a brand, quiz the licensor:

•What is the licensor’s experience in brand management? Has he launched and maintained popular and trustworthy brands?

•What is his support system in marketing and advertising?

•What is his plan for the next 5 to 10 years?

Most importantly, before deciding on what business path to take, do a self-check up:

•Why are you going into business? Is it a hobby, is it for extra income or out of a desire to learn something new?

•What do you need: a business format, or just a brand name?

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