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DISCUSSION INSTRUCTIONS:Replies (300 words total – 100 words minimum, per reply)
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Additionally, you will reply to a minimum of 3 other classmates’ threads. Thus, you will have
submitted substantive written responses to a minimum of 3 other classmates’ threads.
What is Substantive Interaction?
The School of Business is committed to the collaborative learning model. In this course,
collaborative learning requires each student to read and spend time reflecting on other’s
postings, and then respond in a substantive manner to the postings of others. In composing
substantive responses, you can do several things, such as:
o compare/contrast the findings of others with your research;
o compare how the findings of others relate and add to the concepts learned in the
required readings; and/or
o share additional empirical knowledge regarding global business — or international
experiences you may have had — relative to the postings of others.
The collaborative learning model requires substantive interaction between students on a
weekly basis. Consider the Discussion as equivalent to being in a class, thus maintain
professional communication standards at all times (no “IM” shorthand or informal jargon,
DISCUSSION POST:Key Term-Licensing and Franchising
Licensing and franchising are two topics I am very interested in and have researched for my own potential future income. Satterlee (2018) defines licensing as “an agreement that allows one party to use a property right in exchange for payment to another party.” The basic concept of a license is a company will purchase a license for a specific product or name brand and then charge manufacturers and other companies to use said license to sell their own products. An example of this would be a tee-shirt company who wants to sell products with the Harley Davidson bar and shield printed on them. The company would have to contact Harley and request/purchase the license in order to print this logo on their shirts before selling them. If the company fails to get approval and pay for the license then they may face legal action.
Explanation of the Key Term-Licensing and Franchising
Franchising is slightly different in that “a company sells its name, business strategies, and standard operating procedures to another party for a fee” (Satterlee, 2018). In our everyday lives we purchase goods from franchised companies, such as fast-food locations, coffee shops, retail stores, and fitness centers. Starting a franchise normally requires an initial franchise fee then additional capital is required to purchase site the franchise will be built on. The benefit of purchasing a franchised company is an everyday business owner has the backing of a massive company which comes with training support, legal protection, and a well-known branding.
Major Article Summary
The article I chose focuses on a few of the most recognizable brands in today’s society; Chick-fil-A, Starbucks and McDonalds. You may be asking why license versus franchise a company? According to the article “licensed businesses are generally portrayed as a cheaper alternative to franchising” (Gerhardt et al., 2015). From the article I learned is Chick-fil-A and Starbucks are actually not franchised locations but rather licensed companies. A difference between a franchise and a licensee is a franchise company generally owns the land and the building the company is using while a licensed company’s building and land belongs to the owner. “Unlike a McDonald’s franchise, Starbucks licensees serve basically as partners with Starbucks Corporation (like Chick-fil-A), paying fees and product expenses to Starbucks, but acquiring no equity in the business” (Gerhardt et al., 2015). Monthly owner fees, facility rent, a percentage of monthly revenue, and advertising fees are all different costs that need to be considered if someone is considering whether to start a franchise or purchase a license. Due to this, the article concludes that “only through careful analysis of expenses and fees can one determine the best option available to them when comparing a franchised to a licensed business” (Gerhardt et al., 2015).
Summaries of Additional Articles
Material comparing the benefits and downfalls of starting a company and going either the franchised route or the licenses route is plentiful. An article posted in Specialty Coffee Retailer dives into the benefits of each in regards to coffee companies such as Starbucks, Coffee Beanery, and Jumpin’ Juice and Java (Riell, 2002). In another article, the relationship between franchising and licensing is described as “in franchising, the franchisor grants copyright licenses to the franchisee as a part of the business model” (Gandhi, 2014). This is an easy way to understand how a franchised company has the ability to sell licensed products in their stores. Dittfurth et al. (2019), compares three of the most well-known chicken fast food businesses; McDonald’s, Chick-fil-A, Kentucky Fried Chicken, and Chicken Express. The authors recommend considering the average monthly revenue, mortgage costs (if any), franchise fees, and equity in the business before choosing which of these four companies an investor should choose. The fourth article I read about franchising and licensing was published in Forbes and highlighted the differences between licensing and franchising. The author points out differences such as one does not necessarily need to have a specific skill to run a franchised location because the franchisor establishes the training plan and business model for the owner to follow compared to an owner who sells licensed products who may need to have training in business or in the area the business operates (Daszkowski, 2020).