Read here for more information on what it means to be licensed. A master license (or franchise) is usually issued for a larger area, an entire region or a country. A master franchisee has the right to open its own outlets and sub-franchises to individual franchisees (sub-franchisees). The focus will be on sub-franchising, and the master franchisee should set up its own outlets for pilot testing in the target area to have examples to demonstrate successful operations to potential sub-franchisees. The Master Franchisee must provide the necessary financial resources for the implementation and use of the system in the target country or region. The financial resources necessary for the establishment and operation of the system in that country must be mobilized by the master franchisee. Sub-franchisees shall provide the financial resources necessary for the operation of the outlets they operate. The master franchisee is responsible for recruiting staff for the pilot operation, as well as building the infrastructure of the main franchisee`s own business organization. The fee revenues generated by sub-franchisees are shared between the franchisor and the master franchisee. In addition to the benefits for licensors, licensees also benefit. Licensees lease the rights to a trademark for inclusion in their products, but do not share ownership. Access to major national and global brands and the logos and trademarks associated with these marks offers significant benefits to the licensee. The licence agreement obliges the licensee to meet certain sales and royalty targets; Therefore, the Licensee`s objective is to quickly achieve its business objectives and thus fulfill its contractual obligations.
Royalties are the amounts paid by the Licensee to a Licensor for the right to use the Licensed Property. The difference between licensing and franchising is extremely small and is determined by the degree of control created by the underlying agreement. Franchising is used to achieve multi-unit expansion of a brand through franchises that maintain and operate consistent systems and standards. Licensing is used to monetize trademarks and other intellectual property assets by allowing licensees to use the licensed assets in independent companies. Licensing is not an alternative to franchising, and if a licensing agreement includes the licensing of a trademark and control of the underlying business operations, it can be considered a franchise agreement. While master franchisee can be beneficial and beneficial, there are also setbacks, including legal issues and overly long contracts. A particular downside of master franchises is the increase in agency costs. Franchise agreements are necessary to codify the application of conduct.
However, since not all aspects of the franchise can be predicted, this requirement increases the possibility of franchise flickering while reducing the overall ability to monitor all aspects of the franchise. Therefore, some researchers hypothesize that “new franchise systems that use master franchising are more likely to fail than other new franchise systems.” [3] Read here for more information on the benefits of IP licensees. Area developer is a term that is more or less interchangeable with master franchise. Some organizations may prefer one term over the other. Depending on the situation, licensing laws differ. For example, branding licensing laws are different from franchise licensing laws. While the laws may be different, the role of a licensee does not change. Licensing agreements are similar to franchise agreements in that they both deal with the sharing of business assets and intellectual property rights. Licensing agreements differ from franchise agreements in that licensing agreements are more limited than franchise agreements and do not give the licensor control over how the licensee operates the underlying business.
If a license agreement is not properly drafted and involves too much control over the underlying business, the license agreement can lead to an illegal franchise relationship. A license is a commercial agreement that involves the sharing of a trademark, technology or other intellectual property. The contract that creates a license relationship is a license agreement, and the parties to a license agreement are the licensor and licensee. The licensor is the owner of the trademark or technology and, based on the terms of the license agreement, including the payment of a royalty, the licensee is granted a legal right to use the licensor`s trademark or technology. License agreements can be exclusive or non-exclusive and apply to a wide range of intellectual property assets, including trademarks, copyrights, patents and music. Royalties can be structured as a one-time fixed fee or an ongoing fee based on usage, revenue, and other performance criteria. After assigning operations in different regions to master franchises, the brand owner becomes what we call the master franchisor. As such, they oversee each master franchise in the same way that master franchises manage operations in their particular region. In this sense, we see the pyramid structure that connects each store to the top. Initiatives go from the top down, and royalties go in the opposite direction. A licensee may also be a company that receives a licence from the licensor. The licensee must ensure that they obtain all the rights they need to operate their business.
A licensee must also operate the business legally. A master franchise is an entity that controls all franchising activities in a given area. In tort law, the common law distinguishes between a licensee and guests and trespassers, usually for the purpose of establishing an owner`s duty of care to a person on his property in real property. In general, licensees are individuals who have received an express or implied invitation to enter the property without a mutually beneficial business relationship with the owner. To learn more about the benefits of licensed franchisees, click here. Generally, a master franchisor grants the master franchisee or sub-franchisor the right to carry on third-party activities in a defined territory. And then, in terms of regional issues, the sub-franchisor will assume the role of franchisor, but it will not generally own or operate the franchise. You will be removed from a direct management position. This duplication of the franchisor`s role provides an additional layer of control in the overall franchise system, resulting in small inefficiencies on a small local scale, but significantly reducing large inefficiencies. In addition, a master franchise allows the franchised company to benefit from management talents and capital that are increasingly accessible.
In each example licence, the underlying business activities of the licensor and licensee differ from each other and, unlike franchising, the degree of control that the licensor has over the licensee is limited to the underlying brand or technology that is the subject of the licence. To use the example of McDonald`s and Disney Happy Meals, while Disney has a say and control over how McDonald`s uses Disney`s trademarks on McDonald`s Happy Meals, Disney has no control over all McDonald`s operations. A license agreement allows a party (the licensee) to use and/or generate revenue from the property of the owner (licensor). Licensing agreements generate revenue, called royalties, that one company earns when it allows another company to use its copyrighted or patented material. A master franchise is a franchise agreement in which the primary franchisor (the brand owner) transfers control of franchise activities in a particular territory to a natural or legal person known as a “master franchisee”. [1] Master franchisee is a method used by most franchise systems. The operational efficiency of these systems, with their highly complex organizational form, benefits from the increased growth rates of sub-franchises. The licensee is the party that receives a license, while the licensor is the party that grants the license. For example, if a bar owner obtains a liquor license from the state in which he operates his business, the owner is the licensee and the government that issued the permit is the licensor. In exchange for the limited use of intellectual property, licensees often agree to pay royalties to the licensor.
An intellectual property license allows a licensee to use, manufacture and/or sell the property under license. In general, the types of businesses that would adopt a primary franchise model are household cleaners, fast food restaurants, computer equipment, real estate agencies, and convenience stores. [4] When brand managers enter or expand new product categories through licensing, they create an opportunity for a licensee to grow their business. Here is an example of the steps in the process for the licensed product: A master franchise is also known as a master license, especially in cases where the territory it oversees is an entire country. A licensee is the party that receives a licence. Licensees are granted limited rights or legal authorization by a licensor in the form of a license.