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Is granting a franchise the same as granting a licence to trade under another company’s name?
There is no significant legal difference between granting a franchise and granting a licence to trade under another company’s name. Franchising is a term commonly used to describe a particular and complex form of licensing and this differs from straightforward licensing as follows. Firstly, most franchise agreements have a high degree of control provisions within them. In a franchise structure, the permission is not purely to allow someone to do something, as would be the case in a general licence to trade, but is far more prescriptive about the way in which that something is done. Accordingly, franchise agreements are frequently very detailed and cover issues such as the manner of brand usage and the very specific operational methods of running the franchised business. A licence to trade, however, may be a one-off arrangement, possibly part of a company restructuring or sale of business assets. Secondly, in a franchise arrangement potential franchisees are likely to approach the franchisor because of what the franchisor can offer. The franchise agreement will typically be a standard agreement with little room for negotiation, ie the franchisee will usually have a relatively weak bargaining position. In contrast, a licence to trade may be the result of the licensor approaching the licensee. Frequently, the licensee will have a particular market, skill set or product area which it is able to exploit on its own account or which the licensor wishes to access.
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