Difference Between Franchise Agreement and License Agreement

A franchise agreement and a license agreement are both legal contracts that govern the relationship between two parties. Although they may seem similar, there are significant differences between the two.

Franchise Agreement

A franchise agreement is a contract between a franchisor and a franchisee. The franchisor grants the franchisee the right to operate a business using the franchisor’s brand, trademarks, and business model. In return, the franchisee pays fees to the franchisor and agrees to follow certain rules and guidelines set by the franchisor. The franchise agreement typically includes provisions related to the duration of the franchise, territorial rights, and support provided by the franchisor.

Read more about franchise agreements.

License Agreement

A license agreement, on the other hand, is a legal contract between a licensor and a licensee. The licensor grants the licensee the right to use the licensor’s intellectual property, such as patents, trademarks, or copyrighted material. Unlike a franchise agreement, a license agreement does not involve the operation of a business or the use of a specific business model. Instead, it focuses solely on granting permission to use intellectual property in exchange for royalties or licensing fees.

Learn more about license agreements.

Key Differences

The key differences between a franchise agreement and a license agreement can be summarized as follows:

  • A franchise agreement involves the operation of a business, while a license agreement focuses on the use of intellectual property.
  • A franchise agreement typically includes provisions related to territorial rights and support provided by the franchisor, whereas a license agreement may not have these provisions.
  • A franchisee pays fees to the franchisor, while a licensee pays royalties or licensing fees to the licensor.


In summary, franchise agreements and license agreements have distinct differences. Understanding these differences is crucial for businesses and individuals considering entering into such agreements. Whether you are interested in starting a franchise or obtaining a license to use intellectual property, it is important to consult with legal professionals to ensure a clear understanding of the terms and obligations involved.


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