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Licensing and Distribution

Franchising, licensing and distribution is an area of law that is often confused. There are different implications as well as differing regulations according to the type of arrangement that the parties have agreed to operate. As such, figuring out which arrangement to operate should be one of the first considerations clients make.

What is the Difference Between Franchising and Licensing?

The Franchising Code of Conduct states that an agreement, irrespective of whether you call it a licence, will be a franchise agreement if:

  • There is a written, oral or implied agreement;
  • There is a payment (whether upfront or ongoing) for the provision of goods and services;
  • The supply of goods and services follows a system or marketing plan; and
  • The business is using the supplier’s mark or symbol.

As the first two conditions are usually always satisfied, determining whether an agreement is a franchise or licence often boils down to the whether there is a system or marketing plan and whether the supplier’s intellectual property is in use. Determining this will depend on the facts of the case. However, one the largest factors is the degree of control the supplier can exercise in the relationship. The higher the control, the more likelihood that it is a franchise and not a licensing arrangement.

What is the Difference Between Franchising and Distribution Arrangements?

Often, it is easier to tell apart a distribution arrangement from a franchise than it is to determine the difference between a franchise and a licence. Distribution arrangements often involve the supply of goods which the contracting party can then resell for a profit. Some of the more distinct issues in distribution arrangements include things like:

  • Minimum performance criteria;
  • Territory;
  • Pricing;
  • Supply arrangements and delivery; and
  • Product recalls

The distributor usually has the ability to operate their business according to their own terms, as long as they meet their requirements as stipulated in the arrangement with the supplier. In that sense, they have a greater deal of control over their operations.

How Can LegalVision Help You With Licensing and Distribution?

Whether you need a licensing agreement, distribution agreement, or a franchise agreement, LegalVision’s lawyers are more than happy to assist. We can help you draft, review and modify any agreements so that it fits the arrangement that you intend to run.

Contact us today