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Thursday
Jun142007

Medspa License or Medispa Franchise: Where's the difference?

q&a.jpgJK posted this question about becoming a medical spa licensee rather than a franchisee:

"So what do you all think of a licence rather than a franchise? You pay money up front and then pay monthly into a marketing co-op? The Licensor doesn't tell you what to do or what to buy? This way you get the marketing benefits of the co-op?"

It's a good question. This could get interesting.

Part 1: What's the difference between a medpa franchise, and a licensing agreement for your medical spa? 

 
There are some fundamental differences.

Franchising is considerably more structured than business opportunities. However, just as with business opportunities there are variations in the definitions used by the Federal Trade Commission (FTC) and some states and there are even variations among the states. The most common definition cited though is the one promulgated by the FTC which makes the distinction between a simple license and a license that has crossed the barrier and become a franchise.

  1. The licensee is given the right to distribute goods and services that bear the licensor trademark, service mark, trade name, advertising or other commercial symbols;
  2. The licensor exercises significant control over, or provides the licensee with significant assistance and, the licensee's method of operations; and
  3. The licensee is required to make a payment of $500.00 or more to the licensor or a person affiliated with the franchiser at any time before or within six months after the licensee commences business operations.

When these three elements are in place, the license is generally considered a franchise and the franchiser must abide by certain rules generally focused on how they offer their opportunity to the public.

Franchising describes the system of delivery, not the specific product or services associated with the delivery as in a business opportunity. The chief differences between Business Opportunities and Franchising is in the degree of the relationship:

So what should you look at with someone calling themselves a medical spa 'license'. 

First, if they fulfill the above criteria, no matter what they call themselves, they are a franchiser and must fallow franchise law with a UFOC and the whole deal. That's exactly why Solana chose that rout. (They sprang from a company called Health West that the State of California closed down for selling medical practices to not physicians.) 

Now I'm no big fan of the current crop of medical spa franchises (I say current because it's possible that could change.) but there's a reason that almost every business chooses franchising over licensing.

So franchisees are supposed to get ongoing support for their operations (The Dermacare guys can comment on this.). Licensees are pretty much S.O.L. in this regard.

Part 2: A deeper look at licensing for medspas.  

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