Starting a business is exciting. It is essential to understand the different types of companies before deciding which one you want to create. Should you have an LLC or a corporation. Should you license or franchise?
Licensing vs. Franchising
Licensing is not an alternative to franchising. Licensing is a legal relationship that relates to the use of a trademark or technology. A franchise includes a license and involves a relationship of control since the business owner must operate the business following designated systems and procedures.
Licenses
A license is a legal relationship in which one party gives the other party the right to use a trademark, technology, or other legal rights. The License grants limited rights to use a particular trademark, technology, or formula.
Examples of Licenses:
- A license where one company allows another company, the limited right to use a trademark for a limited purpose. An example would be for McDonald’s to make Happy Meals with a Disney trademarked character.
- A license where a technology company allows another company to use a particular technology. An example would be Microsoft granting a license to individual users to use the Windows Operating System.
- A license where a drug company grants a license to another company to manufacture or sell a drug using the patented formula.
What is a Franchise?
A franchise is a legal relationship where the franchisor grants the other franchisee the right to develop, establish, or duplicate the business’s operations. There are many franchise relationships throughout the United States, such as Planet Fitness, Pure Barre, Taco Bell, Great Clips etc…
To be created, a franchise relationship must include three factors. When there is a license, control, and a fee, franchise laws require you to comply with the franchise’s business model and operations. In Florida, you must register and file your FDD, or Franchise Disclosure Document with the state.
Three Factors:
- Trademark License – The trademark license will allow another business to trademark, use your business name, or duplicate your business at a new location.
- Degree of Control – The licensee is required to give the franchisor a degree of control over their franchise and will restrict what the licensee can do with their business.
- Initial Fees – After entering into an agreement, you are paid a license or franchise fee.
Business Attorney, Palm Beach Gardens
Paul J. Burkhart
The Law Offices of Paul J. Burkhart, P.L. have experienced attorneys who can help you with licensing and franchising or converting your license system to a franchise.
Our team assists both individuals and business clients with all their legal needs, including business and Corporate Transactions, Business/Commercial and Civil Litigation, Real Estate, Intellectual Property, Family Law, Probate, and Estate Planning matters. We are a full-service private law firm ready to assist you with any request, large or small. Call 561-880-0155 or visit our website.
Law Offices of Paul J Burkhart, PL
800 Village Square Crossing
Palm Beach Gardens, FL 33410
Phone: (561) 880-0155
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