Franchising v Licensing

If you are thinking of starting to work from home, you might be tempted to do so by starting a franchise. This is certainly a good idea for anyone new to business and working for themselves.

If you are thinking of starting to work from home, you might be tempted to do so by starting a franchise. This is certainly a good idea for anyone new to business and working for themselves and has a lot of good points, not least of which is the help which the franchisor will give you, as part of the package. When someone decides to turn their business into a franchise as opposed to a single business with various outlets all run ultimately by the same person, they have to undertake a lot of changes to their business model and in this they usually incorporate training, sometimes even in their own special premises, vehicles if appropriate, corporate logos designed and printed for the franchisee and a host of other useful business equipment that would be difficult and/or costly for anyone just starting in business to do for themselves.

This doesn’t come cheap of course, but there are some franchise opportunities on the market which are affordable without the need for a huge business loan or raiding your savings to the point of destruction. The thing about buying into a franchise is that you have a degree of help from the franchisor but you don’t work for them, you simply have the right to use their product or name in your business, with various caveats set out by the franchisor. These can be quite strict – for example, a children’s drama class may cap the numbers in a class, making it difficult for you to make enough money to cover your costs – or they may be quite slack – you have to always wear green to work. This will all be set out for you from the start but you must make sure that you are happy with the restrictions, because you will not be allowed to ignore them. You will also pay along the way a royalty to the company and you will also have ongoing costs for stationery etc which you will not be able to source elsewhere.

Licensing is not as restrictive as franchising, as you are not so tied to the company granting the license. They are usually cheaper but then on the other hand they don’t usually provide anything except the right to use the idea or the company name. The contracts are far less restrictive, although the licensor does keep control of how the product concept or the name is used, so you can’t just take out a license and then run with it as part of your part time business working from home and not expect to be pulled up short. The name is important to the licensor as it is a commodity to them, so you have to be careful how you use it. For many people wanting the flexibility of working from home but using an accepted name or concept, licensing may the best way forward, as they will not be monitored in quite the same way as in a franchise, where there are certain expectations in the way of income. This makes it easier for the mum working from home if, for example, she wants to take school holidays off with no revenue coming in.

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• Franchising