Franchise and License are both business activities that bring back great commercial benefits. However, there are still many misunderstandings existing between these activities that new business people usually made. To clarify the differences, we need to penetrate the real characteristics of each of them.
Franchise is a commercial activity where the franchisee carries out goods trading, services with conditions on their own and the franchisor has the right to control and assist the franchisee in managing business operation.
Meanwhile, License is an activity where the licensor (owners) transfers the right to use industrial property objects to the licensee (receiver). Licensee is allowed to use intellectual property rights while the licensor still keeps their right.
The differences between Franchise and License are shown through these criteria:
| Criteria | Franchise | License |
| Objects | Commercial rights (Trading activities associated with trademarks, trade names, business secrets, business slogans, business logos, advertisements of franchisors). | Right to use industrial property objects. In particular, the object allowed to carry out the license excluding geographical indications, trade names. |
| Range | Wider, because the trading associated with brands, trademarks, logos and business secrets | Narrower, because the licensor can only transfer the right to use industrial property objects |
| Purpose | Possessing and managing business system | Aiming to the value of trademarks, industrial designs, useful solutions. |
| Types of Contract | – Franchise contract.
– Secondary franchise contract: a contract between a secondary franchisor and a secondary franchisee under a common commercial right. – Commercial right development contract: the franchisee is allowed to establish more than one business unit under the franchise method within a certain geographical area. |
– Exclusive contract.
– Non-exclusive contract. – Secondary contract. |
| Restriction | – For franchisee: Transfer rights to third parties only with the franchisor’s consent.
– For franchisor: There is no restriction on the franchisor. |
Restrictions on the licensor (in an exclusive contract): the licensor must not transfer it to a third party during the time of transferring the rights to the licensee. |
| Support | Support initial training and provide regular technical assistance to franchisees to manage the operation in accordance with the franchise system. | There is agreement between the two parties on the support. However, technical support is provided only in the form of providing documents, data, and professional knowledge to the licensee. |
| Controlling right | The franchisor has the right to periodically or suddenly check the activities of the franchisee to ensure the consistency of the franchise system and the stability of the quality of goods and services. |
To have more specific information about this issue or any other related to enterprises, foreign investors legal issues, please contact: 024 6653 9546.
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Dream Law LLC, Ltd.
Add: 401, No. 68, Phan Ke Binh road, Cong Vi ward, Ba Dinh district, Hanoi.
Hotline: 024 6653 9546
Email: dreamlawllc@gmail.com
Website: https://dreamlaw.vn/
