What is the difference between a license and a franchise?

There are very subtle differences between a license and a franchise, and if someone is considering licensing their business, they need to be very careful that they are not accidentally creating a franchise. Licensing allows someone to use intellectual property, like a trademark, for monetary gain provided royalties are paid. Conversely, there are three specific elements under the FTC Amended Franchise Rule that make something a franchise. A commercial business arrangement is a “franchise” if it satisfies three definitional elements. Specifically, the franchisor must: (1) promise to provide a trademark or other commercial symbol; (2) promise to exercise significant control or provide significant assistance in the operation of the business; and (3) require a minimum payment of at least $500 during the first six months of operations.

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