Franchising and Licensing
Franchising plays a prominent role in business life and is considered to be the most effective method for expansion without spending considerable capital. In this scenario, the principal owner of a successful business, known as the franchisor, basically sells the intellectual property and the rights to use his brand and business model and processes to an entrepreneur named a franchisee.
The franchisor provides the franchisee with ongoing support in business operations, marketing, and maintains a considerable degree of control over the operations, marketing and processes. The franchisee, in return, pays the franchisor royalties based on annual sales. Licensing is a less sophisticated model where the principle exercises control over its IP but does not control the business operations of the licensee.