Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Hello, I will be assisting you
1) There are no trade-offs between the option of licensing and consulting because the two are not mutually exclusive i.e. you can have both going at the same time. Licensing simply means that you give someone the right to use your brand (as an example) or your store design (as another example). Consulting means, that you actively go into the other person's business and consult them. You can (and should consider) doing both.
As far as obligations and liability, the threshold of liability for each option (and the combined option) would depend on the extent of services you will be providing. In general you should not be making as promises, guarantees or warranties as to the performance of the licensed brand or your ability as a consultant. Take a cue for language used by franchise agreements as to how to use a non-committing language effectively to describe what you will be doing. Obligation wise, that would depend on the length of time you plan to offer your services or make the license available and any on going support you plan to offer if at all.
2) you are correct to identify the licensed brand + consulting are your options to franchising, although generally I would not agree to the statement that one needs 30 stores to justify the expense of creating a franchise as I have seen chains of 5-10 stores go through the process. I would agree that there is tremendous competition in this category.
Finally, be mindful not to represent your consulting/licensing agreement as de-facto franchises by requiring a % of rev share of demand that they buy your products exclusively.
Thank you for allowing me to assist you
Thanks much Attorney. A couple of followup points:
1. I will go with Licensing (to use my brand) and consulting (to train them on systems, processes, etc.). After they setup the business , they would most liklely buy the Supplies (Yogurt Cups, posters, etc) as it will have our company name, brand, etc. Basically, they will buy these products but I am not enforcing them to buy. Do you see any issue with that? or anything I need to think through?
2. I have heard something that Franchise Vs Licensing one difference is that "you can do only one thing" in license and "can do 3 in Franchise" - like, Give brand in licensing and take one time fees, but in Franchise, give brand, training., operational expertise, and take Royalty and sell products (can't do these 2 in license). I assume that is true, Right?
Generally speaking a franchise is a license issued to someone to operate a business using a common brand name, a common operating support system and involving the payment of initial and/or ongoing fees. If the arrangement you propose would have these three components as part of your offering, then you would in fact be offering a franchise, whether or not you choose to call it a license.
Not forcing them to buy you product or to force them to adhere to certain design or methods is key but not the end all and be all. The topic of what is and isn't franchising and gray area of licensing vs. franchising is extensive and is largely controlled by specific state law. I don't want to mislead you and say that you can do something when there might be a state where you're actions could constitute franchising. Since you will have a lot at stake when you are ready to begin marketing your services, I would then contact a franchise attorney and have the attorney list the "safe" states that you can freely go into and the states where you may have some issues in. That would be the most prudent course of action.
Thank you for your continued patronage
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).