What are the Differences Between Licensing, Franchising and a Dealership Model?

Licensing, dealership, and franchise are different business models that involve a relationship between two or more parties, where one party grants the other party the right to use its intellectual property, products, services, or brand.

Here are the main differences between licensing, dealership, and franchise models:

1. Licensing: In a licensing agreement, a company (the licensor) grants another company (the licensee) the right to use its intellectual property, such as trademarks, patents, or copyrights. In exchange, the licensee pays a fee or royalty to the licensor. The licensee has the freedom to sell the product under its own brand and does not receive any support or assistance from the licensor in terms of operations, marketing, or training.
2. Dealership: In a dealership model, a company (the manufacturer) contracts with another company (the dealer) to sell its products. The dealer buys the products from the manufacturer at a wholesale price and then resells them to customers at a retail price. The manufacturer provides support and training to the dealer, but the dealer operates independently and is not required to follow specific guidelines or procedures.
3. Franchise: In a franchise model, a company (the franchisor) grants another company (the franchisee) the right to use its business model, brand, and operating system. The franchisee pays an initial fee and ongoing royalties to the franchisor and follows specific guidelines and procedures set by the franchisor. The franchisor provides support and training to the franchisee, including marketing, operations, and management assistance.

There isn’t a right or wrong way to scale and grow your business, for some models, one of these strategies may be the perfect way to scale your brand and in others, another platform could be more effective to achieve the type of growth you would like to accomplish.  

In summary, while all three models involve a relationship between two or more parties, the main differences lie in the type of intellectual property being granted, the level of support and training provided, and the degree of independence and control granted to the licensee, dealer, or franchisee.

For more information on how to franchise, how to license or how to develop a dealership model for your brand, contact Chris Conner with FMS Franchise, or visit the Franchise Marketing Systems site: www.FMSFranchise.com