Some companies expand through licensing, a term often used interchangeably, albeit mistakenly, with franchising. All franchises contain at least one license, but not every license is a franchise. Consider the following definition of franchising and note how broad and encompassing it is compared to the mere granting of a license:

Franchising is a method of doing business by which an individual or company is granted the right to offer, sell, or distribute goods or services under a marketing plan or system prescribed by the franchisor and substantially associated with the franchisor's trademark, name, logo, or advertising.

In a classic licensing agreement, the licensor merely gives the licensee the right to use the licensor's name on a product, business, or formula without substantially regulating how the licensee conducts his or her business. Coca-Cola, for example, may allow a manufacturer to put the Coca-Cola name and symbol on t-shirts, but Coca-Cola doesn't prescribe how the manufacturer will make, distribute, or market the t-shirts.

Here are three major reasons why businesses enter into licensing arrangements:

1. To protect their trademark in a number of different product categories.
2. To enhance the visibility of the trademark.
3. To generate additional revenues in the form of royalty payments.

Business opportunities are less structured than franchises. In essence, a business opportunity is a package of goods or services that enables the purchaser to begin a business and in which the seller represents that it will provide a marketing or sales plan, a market exists for the product or service, and the venture will be profitable.

Here are other distinguishing characteristics:

• A business opportunity doesn't generally feature the seller's trademark; buyers operate under his or her own name.
• Business opportunities tend to be less expensive than franchises and generally don't charge ongoing royalty fees.
• Business opportunities allow buyers to proceed with no restrictions as to geographic market and operations.
• Most business opportunity ventures have no continuing supportive relationship between the seller and the buyer; after the initial package is sold, buyers are on their own.
• A franchise may be considered safer than a business opportunity since the franchisee receives the ongoing assistance of the experiences franchisor.

A franchise may be considered safer than a business opportunity since the franchisee receives the ongoing assistance of the experiences franchisor.