Franchise vs licence vs business opportunity
These terms get used loosely, but the distinction matters: it decides whether you get the Franchising Code's disclosure and cooling-off protections.
What is the difference between a franchise and a licence?
Why the label matters
Some operators market a franchise-like deal as a licence or business opportunity to sidestep the Code's obligations. But the Code looks at substance, not the name. If the arrangement has the hallmarks of a franchise, a grant to carry on business under a system substantially determined by the franchisor, associated with a brand, with a fee, the Code protections generally apply.
Quick comparison
- Franchise: system + brand + fees + franchisor control; Franchising Code applies (disclosure, cooling-off, good faith).
- Licence: right to use a brand/product/process, often without full system control; Code may not apply.
- Business opportunity: a marketed way to start earning; may be a franchise in substance, check carefully.
- Distributorship / agency: supplying or selling another's goods; usually not a franchise, but depends on the terms.
What to do before you sign
Whatever the arrangement is called, ask a franchise lawyer whether the Franchising Code applies. If it does, you are entitled to a disclosure document at least 14 days before signing and a cooling-off period, protections worth having. If it does not, you have fewer safeguards, so your own due diligence matters even more.
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Frequently asked questions
Does the Franchising Code apply to a licence?
Not automatically. It depends on the substance of the arrangement. If a so-called licence has the hallmarks of a franchise, system control, brand association and a fee, the Code can still apply. Get legal advice.
Is a business opportunity the same as a franchise?
Not necessarily. 'Business opportunity' is a loose marketing term. Some are franchises in substance (and attract the Code), others are not. Check whether a disclosure document is provided and take advice.
Why would a seller call a franchise a licence?
Sometimes to avoid the Code's disclosure and cooling-off obligations. Because the Code looks at substance, this does not necessarily work, but it is a red flag worth investigating with a lawyer.
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