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Franchise Vs. License Agreement Terms - Mr. Franchise Weighs In

Discuss anything to do with property law - buying, selling property

Franchise Vs. License Agreement Terms - Mr. Franchise Weighs In

Postby Featherstone » Thu Dec 01, 2016 1:24 pm

I have a publication I started earlier this year with a partner. Each zipcode gets its own version of our directory by direct mail twice per year. We have successfully launched this in four zipcodes and are negotiating our first license agreement out of the area. What are the pros and cons to a shorter or longer term for this agreement. What would be the difference between a 5 year renewable term or a 10 year renewable term, for us, and what would be the difference for the licensee?

Thank you for your time.

Sean
Featherstone
 
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Franchise Vs. License Agreement Terms - Mr. Franchise Weighs In

Postby Herbert » Sun Dec 04, 2016 3:49 am

I have a publication I started earlier this year with a partner. Each zipcode gets its own version of our directory by direct mail twice per year. We have successfully launched this in four zipcodes and are negotiating our first license agreement out of the area. What are the pros and cons to a shorter or longer term for this agreement. What would be the difference between a 5 year renewable term or a 10 year renewable term, for us, and what would be the difference for the licensee?

Thank you for your time.

Sean
Herbert
 
Posts: 46
Joined: Thu Mar 06, 2014 8:44 pm

Franchise Vs. License Agreement Terms - Mr. Franchise Weighs In

Postby milo » Wed Dec 07, 2016 4:26 am

First question I have is – where are you located? If you are in the U.S. or other jurisdiction that has franchise laws, beware! Most so-called license agreements are really franchises in disguise. Selling a disguised franchise by calling it a license can be the most serious and costly mistake your firm ever makes. There’s a good article about the franchise vs. license(franchising vs. licensing) topic on the Franchise Foundations website at:http://www.franchisefoundations.com/franchisevslicense.html

Going back to your question about 10-year vs. a 5-year term, the answer depends on the provisions of the contract. Generally speaking, a longer contract term means you can enforce provisions like payment, non-compete, etc. for a greater period of time. On the other hand, depending on how the contractual relationship is structured, you may want a shorter term. For example, if the person isn’t doing a great job and you’ve granted them a protected territory, or they’re just a pain to work with, or the protected territory has grown where it can support more than one person, then having a shorter term is better.  The key is good strategic planning when it comes to structuring the relationship. From the buyer’s perspective most of the same reasoning applies. Shorter terms are generally preferred, especially if they’re trying to learn the business then go independent. Again, most of these issues can be dealt with if adequate planning and thought goes into structuring the contract up front.

Any other questions, feel free to contact me through the Franchise Foundations website below.

Kevin B. Murphy, B.S., M.B.A., J.D.

Mr. Franchise

Franchise Foundationshttp://www.franchisefoundations.com/franchiseattorney.htmlhttp://www.franchisefoundations.com/franchiseexpert.htmlhttp://www.franchisefoundations.com
milo
 
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