LICENSING OR FRANCHISING: THE ADVANTAGES OF LICENSING



Advantages of Licensing Compared to Licensing


Are you still in confusion between Licensing and Franchising business investment? Worry no more as you are not alone! In Malaysia, the term licensing is not widely known in contrast to franchising specifically in the field of corporation. Thus this article purposely written to give some insights on the advantages of licensing compared to franchising.


Before going through the advantages of licensing, let us understand first the concept of it. Licensing. Even though licensing is not enacted in any of the Malaysian Acts for the time being, the deal will be protected by contract agreement for both of the parties which are the licensor and the licensee. This concept of licensing is also used by big companies such as Disney, Calvin Klein and others. In a licensing deal, the licensor may, in return for a licensing fee, provide the licensee the right to sell its products or services, use its trademarks, logos, or colour scheme, and get help and training. For the use of its intellectual property, the licensor can also demand royalties from the licensee or be granted a share of the licensee's earnings.


There might be some say that it is just the same with franchising however, in licensing, the licensee will be given more flexibility to operate their business. For example, in Al-Amin Darul Mustopha School, the management was given flexibility to customize their own school logo, manufacturer of student uniforms and others by Al-Amin Edu Oasis as the licensor as long as it did not breach any of the terms agreed upon. This flexibility is given to the licensee for them to be more creative and dynamic as we appreciate brand new ideas to grow bigger.


It is also known that typically the capital requirement for owning a licensed business is much lower than a franchised business. A lower capital fee will open up to a much bigger market and opportunity. In Al-Amin Edu Oasis, we provide a significantly lower capital fee of licensing compared to our nearest competitors as majority of them only offer franchising products. We believed that the opportunity to open up an Islamic school is a good initiative for the society as it is line with the first revelation in Islam thus, we offered a lower capital fee to attract more people in this investment.


Furthermore, one of the biggest advantages in licensing is having lower royalty fees than franchising. Usually royalty will be imposed by some percentage of the profit from the licensor to the licensee as part of the agreement. This royalty fee of licensing is commonly lower than franchising as the purpose is to have more customers. We, as one of the institutions that provide licensing for Al-Amin school, trust that the royalty fee should not be a burden to licensees as they invest to gain profits. However, royalty fees should be imposed competitively and sustainability for the licensor to operate effectively from time to time.

In conclusion, the concept of licensing has many advantages that will be beneficial to most of the investors out there. Authorised license, flexible operation, lower capital and royalty fees are the biggest advantages that investors should look into and hence Al-Amin Edu Oasis are welcoming to those who are interested in the concept of licensing and Islamic education to contact us for more details.