Question: What Are The Pros And Cons Of Licensing?

Are joint ventures always 50 50?

In a joint venture between two corporations, each corporation invents an agreed upon portion of capital or resources to fund the venture.

A joint venture may have a 50-50 ownership split, or another split like 60-40 or 70-30..

Is licensing a good idea?

For many people and products, licensing offers the best balance of characteristics. … Licensing offers a balance of risk and reward, because it allows you to leverage the success of an already established company for distribution.

What is the difference between license fee and royalty?

Royalties are usage-based payments for using an asset or property. … Meanwhile, a licensing fee is money paid by someone using someone’s property, but this fee is generally a fixed amount. Royalties can be collected for things that are also licensed, such as patents.

What are the benefits of licensing?

The advantages of a licensing arrangement include:quick, easy entry into foreign markets, allowing a company to “jump” border and tariff barriers.lower capital requirements.potential for large return on investment (ROI), which can be realised fairly quickly.More items…•

Why Franchising is a bad idea?

A major reason why I believe franchising to be a bad idea is the cost to purchase a franchise. The most well known and profitable franchises have a cost of entry that is simply not possible for most of us. … Even a “low cost” franchise can have you investing up to $150,000.

What are the 3 P’s of licensing?

The 3 P’s of collegiate licensing are protection, promotion, and profit.

What are the disadvantages of joint ventures?

Disadvantages of joint venturethe objectives of the venture are unclear.the communication between partners is not great.the partners expect different things from the joint venture.the level of expertise and investment isn’t equally matched.the work and resources aren’t distributed equally.More items…

Which is better licensing or franchising?

On the most basic level, the difference between a franchise and a license is the amount of support you can expect to receive. A franchised system will provide you with support in site selection, training, marketing and much more, whereas a licensing agreement provides you with little to none of that.

How do licensors get paid?

The Licensor receives a perpetual/time bound payment as a percentage of sales in regards for using the intellectual property. You can take for example – an earning from copyright, patent on new products, and consumer product licensing more. Royalties and license are members of same royal family.

What are the pros and cons of joint ventures?

12 Pros and Cons of Joint VenturePros of Joint Venture. Combined expertise. Better resources. No long term commitments. Shared profit and risk. Financial benefits. Growth.Cons of Joint Venture. Conflict. Commitment issues. Vague objectives. Jurisdiction. Language and Culture. Proper planning and research.

What are some examples of licensing?

Examples of licenses include a company using the design of a popular character, e.g. Mickey Mouse, on their products. Another example would be a clothing manufacturer like Life is Good licensing its designs and brand in a certain country to a local company.

What is licensing in strategic management?

Licensing is a transfer-related market entry strategy. It involves a company (known as the licensor) granting permission to a company in another country to use its intellectual property for a defined time period.

What is a guarantee in licensing?

The minimum guarantee is, simply, the number you guarantee to pay the company from which you are licensing property, regardless of whether you sell only a single product or five hundred thousand. This minimum guarantee MUST be paid.

What are two possible risks involved with licensing?

Loss of control of the licensee manufacture and marketing operations and practices leading to loss of quality. Risk of having the trademark and reputation ruined by a incompetent partner. The foreign partner also can become a competitor by selling its production in places where the parental company has a presence.

Why do joint ventures fail?

There are many reasons why Joint Ventures fail and five of the most common reasons are: Lack of a proper Joint Venture Agreement. … The simple reason is that the struggling partner will drain the Joint Venture, not allowing the it to build up capital for challenging times or future expansions. Control issues.

Is licensing low risk?

Lower Your Risk If you license your process out to another company, you’re not committing your own money and time to producing the goods. The licensee does, while you receive royalty payments. … Any legal and financial risks are born by the licensee, not you.

Why is a licensing agreement better than a franchise?

With a franchise, you’ll likely receive support in training, marketing, site selection and other areas, whereas a licensing agreement provides little or no support at all. … Learn more about these two business models so you can make the right choice for you.

What was the first franchise?

In 1932, Howard Deering Johnson established the first modern restaurant franchise based on his successful Quincy, Massachusetts Howard Johnson’s restaurant founded in the late 1920s. The idea was to let independent operators use the same name, food, supplies, logo and even building design in exchange for a fee.

How are royalties paid?

Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

What does royalty free mean?

Royalty-free (RF) material subject to copyright or other intellectual property rights may be used without the need to pay royalties or license fees for each use, per each copy or volume sold or some time period of use or sales.

What are the risks of licensing?

Disadvantages of licensing patentsloss of control (partially or fully) over your invention.relying on the licensee’s ability to effectively commercialise your patent.risk of poor strategy or execution damaging the product success.poor quality management damaging your brand or product reputation.