There are many ways for companies to grow their business and many factor to be considered when it comes to plans and strategies. To name a few, companies’ financial capacity, products/services, market, government regulations and etc.
Franchising and Licensing are two main common growth strategies adopted by most companies worldwide. In most of the countries, Franchising and Licensing are considered to be the same term and have similar arrangement. However, this is not the case in Malaysia because both strategies have a distinguish differences that will be outlined in table below. Thus, companies in Malaysia or companies that plan to expand their business in Malaysia need to really understand the concept in order to choose the best strategies that is suitable for their businesses.
| Description | Franchising | Licensing |
| Definition
|
A contract or agreement by which: –
1. The franchisor grants to the franchisee the right to operate a business according to franchise system as determined by the franchisor. 2. The franchisor grants to the franchisee the right to use a mark, or trade secret, or confidential information, or intellectual property (“IP”), any intellectual property, grants such right that the franchisor possesses to permit franchisee to use the intellectual property. 3. The franchisor possesses the right to administer continues control. 4. Payment of fee. |
Selling the right to use the Company IP, brand, or business processes to another party and payment of fee.
|
| Regulation | Franchise Act 1998 (Amendment 2012) | Law of contract |
| Fees
|
1. Initial franchise fee
2. Monthly management service fee 3. Marketing fund contribution |
1. License fee |
| Operational control | Franchisor has tighter operational controls with the use of Standard Operating Operation (“SOP”) in placed. | Licensor has little or no operational control on how licensee operates the business or licensed products. |
| Training | Franchisor provides extensive training as a whole. | Training is limited to product knowledge. |
How do we decide the best growth strategies for our business?
In summary, there would be no standardised strategies in growing companies. It will be highly depending on the nature of business and the degree of control over company’s IP.
For more information on how we can help you operate a franchise or license your business, call 016 276 5616, email info@smartfranchise.com.my
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