Welcome all you would-be (and existing) franchisee entrepreneurs! When it comes to entering the restaurant chain business, there are two popular ways to go about it – licensing and franchising. At first glance, they might seem the same, but there’s a marked difference in scope and application that you should be aware of, particularly if you’re looking to break into the market and establish your own restaurant portfolio.

As an entrepreneur, you understand the importance of working hard to build your brand, perfect products and services, and create a unique relationship with your clientele. You’ll definitely want to share that with potential restaurant patrons, but maybe you’re not sure which path to take. That’s where licensing and franchising comes in, so let’s discuss the two.

 

1. Licensing Vs. Franchising

Licensing is essentially the practice of renting out an intellectual property (IP) to others. The owner gives permission to another company or individual to their brand name, logo, and recipes in exchange for a fee. It’s like letting someone borrow your favourite cookbook, and allowing them to make a version of your signature dish. You still own the original recipe, but someone else gets to use it to make a profit.

Franchising, on the other hand, is like selling a piece of your business to someone else. You give them the rights to operate your restaurant using your brand name, logo and recipes, in exchange for a fee and a percentage of their profits. In this case, the scenario changes a bit to selling your favourite recipe book to a person who wants to open their own restaurant, and serve your dishes to their customers.

So, what’s the difference, exactly? Well, with licensing, you’re still in control of your brand and recipes. You can choose who you want to license to, and you can set the terms of the agreement. With franchising, you’re giving up some control, but you’re also getting a guaranteed income stream, and the opportunity to expand your brand quickly.
Franchisors hold the rights to the restaurant brand, and you as a franchisee get to share in the already-established success of said brand, while helping the franchisor build even more momentum. Franchisors get to expand their brand quickly and easily, without having to worry about finding new locations, or training new staff. That’s your job as a franchisee. On the other hand, franchisors do give up some control over the quality of the brand and the way it’s presented to customers, and if the franchisee doesn’t do a good job, it can reflect poorly on the brand. There’s a little bit of give and take here that wouldn’t be present in a licensing model.

Speaking of licensing, the owner gives away more control over their brand and recipes, and while they can choose who they want to license to, and set the terms of the agreement, it can be a slower and more labor-intensive process, as they need to find and vet potential licensees, as well as keep tabs on progress.

2. Which Is Better?

For franchisors, the choice is clear, since it aligns with their goals and priorities. They want to expand their brand quickly and easily, which means franchising is the most efficient and advantageous of the two models. Sure, there is some risk of reputation damage, but this is largely mitigated through contractual obligations aimed at franchisees, who need to work as a team with the franchisor head office.

Ultimately, the choice between licensing and franchising comes down to business goals and values. For you as a franchisee, the initial costs of entering the franchising business are higher than a licensing model, but you in turn receive access to high brand exposure and consistency, comprehensive support, and a seasoned team working at the head office on advertising, marketing and new initiatives, all of which you won’t ever have to worry about. It’s like having access to an entire team of professionals and a tried-and-tested business model that has already been proven in the wild.

 

3. Conclusion

At St. Louis Bar & Grill, we knew that the way forward was a franchising model, and we’re proud to constantly welcome new franchise owners into our family. This approach is what has allowed us to push into new markets right across Canada, and experience explosive growth. If you’re interested in joining our successful family of franchisees, we’d love to hear from you! Contact us today, and we’ll help you open your very first franchise location. Where you go from there, is up to you!