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Franchising Vs. Licensing A Business

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FRANCHISE VS. LICENSE

What’s the difference between franchising vs. licensing a business? Is a license business model really different from a franchise business model? Whether you’re a franchise attorney or not, the starting point in any analysis is to consider the legal aspects, then the business aspects. This article focuses on the legal aspects. A franchise always includes a license of the brand and operating methods, along with assistance (training, an operations manual, etc.) or support (providing advice, quality control, inspections, etc.). A license that is supposedly “not a franchise” but contains these elements, is a disguised, illegal franchise with significant legal ramifications and risk.

REGULATORY BACKDROP

In considering the legal aspects, begin with the following premise that applies to both options:
If you put someone into business (or allow them to use your business brand/mark) this transaction will normally be a regulated activity, subject to substantial penalties for noncompliance. If it looks like a duck and walks like a duck, it’s a duck. This guiding legal principle (and common sense), coupled with the business aspects of selling a franchise vs. a license (discussed below) will answer most questions.

FRANCHISE & BUSINESS OPPORTUNITY LAWS

Why does regulation exist? Arising from the ashes of documented past abuses, where tens of thousands of individuals lost all of their worth by investing in nonexistent or worthless business endeavors, the government has devised two principal consumer protection mechanisms:

(1) franchise disclosure-registration laws; and
(2) business opportunity laws.

The thrust of these laws is to require sellers to give potential buyers enough pre-sale information so informed investment decisions can be made before money changes hands, contracts are signed and sizable financial commitments are undertaken. It doesn’t matter what terms are used by the parties in contracts or other documents to describe their relationship. For example, the contract may call the relationship a license, a distributorship, a joint venture, a dealership, independent contractors, consulting, etc., or the parties may form a limited partnership or a corporation. This is entirely irrelevant in the eyes of governmental regulators,. Their focus is not on semantics, but whether a small number of defining elements are present or not. Today sellers are subject to a complex web of regulations that differ from the federal level to the state level and even differ widely from state to state. Murphy advises through Franchise my business.

DON’T FALL FOR TODAY’S SUCKER PLAY

The internet is filled with statements like “Compare high cost franchising to low cost licensing.” Firms or individuals that say calling it a “license” dispenses with legal regulations are delusional and wrong for at least three reasons:

(1) Common Sense – if it was really that easy, everyone would be doing it that way. The 3,000-plus companies that are franchising are not stupid. Many can afford the very best legal talent available. It’s not a coincidence they’re all franchising and not licensing;

(2) Even if the relationship can be structured so it doesn’t fall within the definition of a “franchise,” the backup regulatory protection mechanism – business opportunity laws (discussed below) – will certainly apply. And complying with these is a lot more expensive than going the franchise route; and

(3) Any analysis must include federal law (franchise and business opportunity) as well as applicable state laws covering the same dual prongs (franchise and business opportunity).

This all reminds me of some financial planners who still advise their U.S. clients that filing U.S. income tax returns is not required under their interpretation of the U.S. Constitution. It just doesn’t work that way. Actually it does work, but only until the IRS catches up.

The “licensing avoids franchise regulations” spin (which, not surprisingly, is not accepted in the legal community) also only works until the company gets caught. The logic (not) goes something like this: licensing arises under contract law, not franchise law and therefore franchise law doesn’t apply. Sound’s just like the “you don’t have to file a tax return because tax laws don’t apply” argument.

REAL LIFE EXAMPLES

A license attorney prepared a dealer license agreement and ignored the FTC Franchise Rule disclosure requirements (“licensing arises under contract law, not franchise law”). The dealers became disgruntled and hired a litigation attorney who sued the company for, not surprisingly, selling disguised illegal franchises. It cost the company $750,000 to go to trial in federal court to answer the question “Is our license contract an illegal franchise?”

“Is our license really a disguised, illegal franchise?” is always a very expensive question to answer. Unless spending $750,000 is your idea of a good investment. Trying an end run around the franchise disclosure laws by calling it a “license” or a “dealership” may be a cheaper way to go initially. But it’s only a question of when (not if) you will be caught. Be prepared to spend mind-boggling amounts down the road when the disguised illegal franchise is challenged for what it really is.

In a 2008 case, Otto Dental Supply, Inc. v. Kerr Corp., 2008 WL 410630 (E.D. Ark. 2/13/08) another disguised franchise vs. a license was at issue. The company claimed it sold just a license, not a franchise and the franchise laws simply didn’t apply. It made a motion for summary judgment to have the case thrown out of court.

The federal Eastern District Court ruled against the company and ordered the case forward. It said whether or not the license was really a franchise was up to a jury to decide. Jurors are like most of us, and apply common sense to the simple defining elements of a franchise. They are not swayed by semantic arguments like “licensing arises under contract law, not franchise law and therefore franchise law doesn’t apply.” Another very expensive franchise vs. license learning lesson.

And here’s a final example. In Current Technology Concepts Inc. v. Irie Enterprises Inc. the Minnesota Supreme Court concluded a licensing arrangement was a franchise and held the franchise company liable for damages in the amount of $1.3 million for violating the Minnesota Franchise Law.

Hearing “after the fact” that the arrangement was an accidental, illegal franchise and you’re liable for $1.3 million was the last thing that company ever wanted to hear. Perhaps they got themselves into this mess by listening to statements found on the internet that franchising is expensive and licensing inexpensive. Again, if something sound’s too good to be true, it usually is and this should be a big flashing red light.

ROOTS OF LICENSING

It is important to remember the roots of licensing: artwork and character licensing – where the owner (licensor) grants permission to copy and distribute copyrighted works, such as allowing Mickey Mouse to appear on t-shirts and coffee mugs.

The most recent explosion in license law is the licensing of software on personal computers. Or, the owner of a trademark allows another a license to use its mark as a way of settling a trademark infringement suit. These are common and accepted forms of licensing. However, the attempt to use licensing as an end-run around the franchise laws is a corrupted use licensing was never intended for.

This is not to say licensing a business may be a viable option in foreign (out of U.S.) transactions where U.S. laws don’t apply – but these are a very small minority. Most transactions and contracts cover U.S. activities and residents, so the franchise vs. license question is usually an easy one to answer.

IPL – T20 Innovation or Invasion

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Traditionally, innovation is seen as capacity for something new or different
introduced, but in the world of sport, especially in the context of
IPL, the term innovation has to be rather more liberal, accepting in its
sheathe more than just the new or original thought. In other words,
recent innovations in T20 cricket vis-a-vis IPL borrowing and adopting
ideas from other popular sporting leagues like National Basketball
Association (NBA) and National Football League (NFL) tend to lean on
imitation, yet irrelevant of its broad acceptance; imitation can never
be equated to innovation. From terms like private franchises, player
auctions and cheerleaders to buzzwords like strategic timeouts &
dug-out that are conventional to a NBA or a NFL follower are now
familiar with cricket followers courtesy IPL. Watts Humphrey rightly
said “Innovation is the process of turning ideas into manufacturable and
marketable form”, with its tremendous success, IPL serves as a standing
testimony to his words, boasting a billion dollar revenue generating
business that is largely targeted to benefit the investors/franchise
owners and partly the players.

Personally,
the bottom line in writing this has nothing to do with IPL’s great
capacity to spring surprises, nothing to do with its much talked about
glorious future. On the other hand, it has to do with what have taken on
the nightmarish dimensions of a dark reality – Cricket will never be
the same. But this is a harsh reality that is not easy to deal with for
the great sport’s many puritans, who often love the game more for
quality than for cheap entertainment. What started out innocuously as a
profitable vision has gained sizable force and substantial magnitude
needed to hold for large-scale and long term expansion. Truly, IPL has
invaded and deeply penetrated in all walks of T20 cricket and you just
have to scratch the surface to see it.

As it turns out, almost
all top class players from all cricket playing nations have been lured
to this wheel of fortune, forced to sign up for the league and for the
huge ransom they sign on, it would not be surprising if IPL dictates
them to put league before nation. For sure, players who once took pride
in playing for the country have succumbed to the pressures of IPL. As a
matter of fact, the very dimension of the sport has changed, making it a
highly demanding and stressful one. Tight schedules and frequent
travels are not expected to help the player’s cause anyways. But then
the real question is what drives them to return fit as a fiddle to play
for the league and not for the nation in its dire needs. The key to this
drive lies elsewhere and any attempt to unravel it would prove a futile
exercise.

IPL
did not seem to spare commentators either, who scream and shout at the
top of their voice making a conscious effort to contrive extraordinary
things out of ordinary stuff just so to breed a sense of drama. And
commentators here are not amateurs taking a shot on the big stage but
are who’s who in this profession brought down to the levels of ordinary
salesmen making a sales pitch to promote their product. For viewers it
definitely is an annoyance to constantly hear brand jargons like DLF
maximum (six runs hit by batsman), Karbonn Kamaal Catch, Citi Moment of
Success (bowler taking a wicket), Maxx Mobile Time-out from reputed
commentators who make a mockery of the sport in the name of
entertainment. Ultimately the greatest entertainment that this sport can
provide has to happen within the playing yards and not through the hype
and hoopla that surround it.

How to Cut Down the Risks in Small Business

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You can’t get all that far ahead in business if you haven’t taken risks. Many people in business try their best to avoid big risks, but there are some that are worth taking. Whenever it comes to any risk in life, whether it’s investing company money or asking a girl on a date in high school, we constant exaggerate potential negative outcomes in our minds. Rather than picturing poor outcomes, proper evaluation of the level of risk for the situation will help weigh out the pros and cons. Taking risks that have been properly weighed out in pros and cons is the best way to get ahead in business, especially when that company is smaller and intends on growing much large in the near future.. Overall, it is a chance of exposure to gain or loss for your business that might be undertaken after the advantages and disadvantages are carefully considered. If you have been playing it safe with your business, it might be time to take a risk that will change how you look at decision making. Here are 7 ways to minimize the risk for your company:

1. Analyze Which Risks Make Sense for You Risks are different levels of extremes for everyone, depending on their comfort level with change. For your business, you may want to become more efficient with your processes. For another, the concentration might be on growing their customer base. These two businesses would need completely different and specialized plans for what they wanted to achieve. .

2. Set Your Goals and Brainstorm By knowing your goal and working backwards to see how much time it will take to make the change, you prepare yourself for the process of the change. This step in the process also makes you aware of how many people will need to be involved and when.

3. Evaluate the Risk Level of Each Opportunity When researching and preparing for the possibility of taking a risk, it is important to be unbiased to judge – such as an accountant, insurance agent, or marketing insight – in order to let you know when it would be a bad idea to push forward with business growth in mind.. By getting an outsiders insight on your business, you get a more solid foundation of where your business is and where it could end up.

4. Create a Detailed Plan of Execution With a calculated risk, you have to figure out what your goals are and fill in a roadmap of what will need to be done to make it happen. For example, coming up with a training program to roll out new procedures in your business works best when there is a set plan of exactly what each employee will learn and when. By thoroughly researching the change you are planning to make, you know the consequences and benefits of what you are about to do. Rather than playing it safe or hiding inside the procedures you know work well, you can find more opportunities in business than you ever knew were possible. Stepping out of your comfort zone is never easy but when it comes to business, easy tends to rarely be the best option. Instead, trying out something that may or may not work could lead to the big break you were looking for either directly or indirectly by showing you what you would have never learned on your own within your own zone of comfort..

5. Edit and Change the Process As You Go If you get halfway through a process and realize it is not going as planned, don’t be afraid to change it! There is no one size fits all fix. Each company has its own issues and goals that cane be achieved by looking at solutions that are tailor-fit for your own specific needs..

6. Review the Results Whatever the outcome of your plan, use the results to help you adjust future decisions. Maybe you needed more funding or more time to complete the goal – now you are more aware of what to expect in your next endeavor.

7. Don’t Be Afraid to Fail Not all risks go as planned, but it is crucial that you learn from your mistakes. While there is always a chance of failing, we feel as though risks can be very beneficial to everyone involved when they are well thought out and executed properly. Risk is unavoidable, so controlling it with an informed decision is the best approach you can take for your business.

Shopping Online For Clothes – Few Tips

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Shopping on the internet not only saves time and money but also provides the items at your doorsteps with a mere click. Each time you purchase clothes online ascertain the size of the apparel, compare prizes on various websites and keep check against scams or disreputable sellers. In this article are enumerated a few tips for buying clothes online.

List Your Requirements

Making a list of the items needed is indeed a great idea. Those shopping for multiple products must write everything in their notepads before browsing through the web. This will aid the buyers to keep a track of their development or searches and also prevent one from getting overwhelmed by the choices available.

Take The Measurements

Every manufacturer tends to size the clothing differently, so do not rely on any standard or even numeric scale for sizes. Also as one cannot try the clothes before buying them online, therefore the essential detail of measurements must be kept in mind. Dresses for women require the women to be aware of their bust, hip as well as waist measurements. Additional measurements involving height, arm length or inseam would also help in the purchases. Men and children should also follow similar guidelines.

However, since clothing for women tends to be diverse from Red Carpet Dresses, to jeans for women, accurate and additional measurements are always preferred.

Information on Clothing Size

Most of the manufacturers tend to have a standard size chart for their clothing range. Product descriptions must be read carefully and minutely before purchasing the items. Also double check on the method of size measurements. One usually discovers that while some manufacturers rate you a -small- others might consider you -medium-.

Avoiding Distraction

Most women while looking for clothes tend to get distracted to the discounts in the women shoes category or the bags category. When shopping for clothes, look for the specific items like dresses or tops but never all at once. Also avoid looking for accessories at the same time, as you might exceed your budget in this fashion.

Buying clothes is the most pleasurable and awarding activity, but must be carried out with religious concentration without straying into alluring forays as projected by various advertisements or recommendations of friends. Remember one product at a time, should be your mantra while shopping online for clothes.

How to Stop the Logging Industry from Losing its Youthful Appeal!

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People have many assumptions about the status of the logging industry. This could be due to the number of layoffs in the industry resulting from the economic downturn of the past few years. It is difficult to get exact information about the number of people who have lost their jobs because of the recession. This has created big differences between the number of people terminated and those that are being recruited. Moreover, it is undeniable that there are many problems in the logging industry that have caused a critical situation to exist.

Worker Enticements

In spite of this ongoing crisis, the logging industry is attempting to find creative ways to make it more enticing and appealing. In fact, future projections in Washington are expected to show progress being made, which is quite the opposite of what had been projected. The effort of logging companies to cope with the recession is actually praiseworthy and the annual revenue of the logging industry is reaching billions of dollars. To be exact, Atlanta is making $28 billion annually.

Common Problems

Some of the more common problems that are encountered by many workers when applying for jobs within the logging industry include the monthly salary, insurance premiums, health benefits, retirement packages, and compensation packages. On top of this, most potential employees have the impression that this is not a lucrative field in which to earn a good salary; yet the fact is that some logging companies are booming and will continue to grow in the global market.

There is also the problem of the effect of testing for drug abuse. For whatever reason, drug testing in this industry is putting a heavy price tag on keeping a reliable workforce. Contractors are finding it increasingly difficult to retain employees due to this one issue. On the plus side, those companies and contractors that enforce a drug-free workforce will pay reduced worker compensation premiums.

Increased Core Compensation

Five years ago, new employees shied away from applying for jobs in the logging industry because they were required to pay for certification programs and training for safety awareness just to work with forestry equipment without receiving any type of compensation for those incurred expenses. Additionally, the wages were rather low. The annual mean salary for a typical logger in United States ranges from $30,260 to $33,269.

Currently, the anticipated yearly salary for all logger jobs is expected to increase due to the tight competition in the global arena. The core annual compensation amount could reach up to $50,041 per employee. Core compensation includes: base salary; social security; 401K/403B plans; disability insurance; healthcare insurance; pension; and paid time off.

The logging industry has been clouded with negative notions brought on by the economic recession and the future remains uncertain for this particular business. Perceptions have existed that this was an unstable working environment because the monthly salary was low with minimal benefits and too many requirements to be certified to do this work. This type of business is losing its appeal because of the upswing battle against the global market. Yet, due to new regulations, strategies, employee benefits, innovations such as bio-fuels and better forestry equipment, working in the logging industry has become more appealing. This can only hope to give the logging industry a brighter future!