Franchising vs. Licensing: Which one is right for you?

We’re excited to host guest author Barre Forte for this post!

For those of us who live and breathe fitness, opening your own studio is a dream come true. It’s the opportunity to be your own boss, control your workplace, increase your income and have more job security—all while helping others to look and feel their best.

Owning a studio is not without its challenges, however, which is why many new business owners consider a franchise or license agreement when starting their own business. Both models, each with their unique strengths, offer the support of an organization behind you.

Here, we explore the different models to help you consider which may be a fit for you and your business goals.

FRANCHISE VS. LICENSE 101
Both franchise and license agreements allow for established businesses to contract or license their brand for a separate party to run a similar business—in exchange for a fee and portion of the profits. When contemplating what’s right for you, you’ll need to consider how much autonomy you wish to hold as your own business, and what kind of investment and share of the profits you’re willing to make.

Franchise arrangements, in general, allow the franchisor to exert more control over the franchisee, dictating where you open, the scope of your construction, your floor plan, class format(s), and even the type of equipment you use and clothing you sell. While there is less autonomy for the individual franchisee, this control also comes with a great deal of support.

Alternatively, a license agreement simply provides an individual or company with the right to use licensed material and intellectual property, such as a specific class format or a branding element that identifies the studio as being associated with a particular organization. A licensor does not control the studio operations of the licensee, but at the same time can also provide a significant amount of support and guidance.

MONEY MATTERS
Franchisee and licensees pay an upfront fee and ongoing royalty payments to the franchisor or licensor that owns the brand or intellectual property. While franchise and license agreements vary significantly, looking at the cost distinctions between the two, it is generally more affordable to pursue a license agreement than a franchise agreement. For example, a Barre Forte license agreement requires a license fee of $18,500, with the total initial investment to open a studio typically ranging from $50,000-$100,000. This is significantly lower than the typical investment required by studio franchises, which can range between $150,000-$300,000 with a franchise fee of $30,000-$50,000.

BENEFITS OF THE FRANCHISE RELATIONSHIP
While entering into a franchise requires more of an initial investment, the benefits of an entire organization supporting you are powerful. You’re granted access to a proven studio concept, an established customer base and on-going product and service innovation. This is all in addition to the fact that by purchasing a franchised studio, there is a lower statistical risk of failure compared to opening an independent studio of your own. It will also be easier for you to obtain financing from banks and lenders when you have the backing of a franchisor.

It’s important to note, however, that franchises are required to follow specific Federal Trade Commission regulations, while licensing carries fewer restrictions. The regulations governing franchises are more complicated because franchisees must adhere to both federal and state laws, with the former varying from state to state. In general though, franchise laws across the country require the franchisee to maintain the franchisor’s official studio operation practices, marketing plans and supplier agreements.

BENEFITS OF THE LICENSE RELATIONSHIP
License arrangements are typically more flexible, with lower barrier of entry as mentioned. By virtue of the relationship, license agreements also tend to be more collaborative in nature, lending the new studio owner autonomy while still providing a great deal of support. Licensors can help you work through questions, point out potential opportunities, and warn you of possible complications you may experience along the way—all while allowing you to choose what you feel is best for operating in your market, in your studio, and with your clients.

A licensor and their team can also help you identify the best advertising, hiring, training, and administrative and operational practices for your studio’s success. This can include providing advice on property selection, neighborhood demographics, competitor analysis, and studio promotion strategies. Plus, a licensee can get access to a functioning website, content, photography and videography, along with already-established vendor relationships.

THE BOTTOM LINE
No matter how you slice it, opening your own business requires major amounts of time and money. Since both franchise and license agreements require significant legal consideration, it is recommended that you seek the services of a lawyer before entering into any agreements. Without the support of a franchisor or licensor, however, someone looking to open a studio on their own will likely end up spending significantly more time and money towards making their dream a reality. Investing in a franchise or license agreement is a smart way to make sure your money goes further and your doors open sooner.

ABOUT BARRE FORTE
Barre Forte is a dynamic barre fitness studio where people of all shapes, sizes and abilities can experience the most effective and empowering workouts in an environment infused with fun and positivity. Barre Forte also offers a nationally recognized barre certification program and helps barre instructors around the country open studios through licensing agreements. If you’re ready to take the next step towards studio ownership, a Barre Forte license agreement offers the best of franchising and licensing in one. For more information, visit www.barreforte.com.