When you think about franchising, perhaps McDonald’s comes to mind. When you think about licensing, maybe Disney characters. So how does franchising and licensing apply to the self storage industry? In this blog, we’ll take a look at the difference between franchising and licensing in self storage, and the pros and cons of each.
What is Self Storage Franchising?
Twenty years ago, the need for self storage franchises wasn’t as great because competition was limited. Today, the industry is on fire, and demand for ways to enter it have increased, leading to more franchising. So what is a franchise?
A franchise is a business agreement between a franchisor (the original owner of the business) and a franchisee (the startup business). The franchisor sells the rights to their brand – including products and services, intellectual property, and more – to a franchisee, who then opens up a new branch location under the franchisor’s brand name. It’s essentially a duplicate of the original business.
Franchises are regulated under the Federal Trade Commission’s franchise rule and must comply with state laws. As part of the franchise agreement, the franchisee will pay a royalty and often an initial fee for the right to do business under the franchisor's name and system. There is a lot of interdependence between the franchisee and franchisor in a franchise relationship. Because their reputation and name are on the line, the franchisor will provide training and continued mentorship to the franchisee to be sure they maintain a certain level of standards. A franchisor also retains ultimate control over how their brand is used and how each franchise is operated.
While fast-food restaurants make up the bulk of the biggest franchises in the world, others like Ace Hardware, Century 21, Marriott, and RE/MAX also top the list. In self storage, TopFranchise.com lists some of the best franchise opportunities including Storage Authority and U-Haul.
Self Storage Franchise Pros and Cons
Franchising in the self storage industry allows a potential owner/operator to get into the business fast without having to reinvent the wheel. For those who’ve never built or owned self storage, it’s often easier to get financing for a franchise. In addition, a good franchisor is invested in the success of their franchisees and will offer support and guidance to new business owners along the way, from planning and construction through the transition to operations.
Of course, there are some big drawbacks. For a franchise to work, the new owner must be willing to buy completely into someone else’s system and pay fees to do it. If you value your independence and believe only your way is the right way, then franchising isn’t for you. Nick Powliss sums this up well in his story Before Buying a Franchise, Read This:
“When you decide to buy a franchise, you are giving up your right to make changes in that business… Your role is to listen, absorb and disperse the models, systems, and processes created by the franchisor. It is not your job “test and trial” systems they have put in place... You paid that franchise fee. Why? Because that fee buys you the right to operate their car, and just like a license to drive, it can be taken away. If you want to be the ultimate entrepreneur…. start your concept from the ground.”
What is Self Storage Licensing?
Licensing is a much less complicated relationship compared to franchising. It’s a limited, legal business agreement where one party pays a fee to use certain registered trademarks of another brand. The business relationship is between the licensor (the one who owns the trademarks) and the licensee (the one who is granted rights to use them). Think of licensing as one entity “loaning” another its brand.
As mentioned earlier, Disney is one of the most popular licensing examples. When you purchase a T-shirt, mug, backpack, or just about any other product featuring a Disney character (or Marvel, Pixar, or Star Wars character), there’s a good chance Disney didn’t produce the item; rather, it licensed out the rights to those product manufacturers to use the characters’ images in exchange for royalty fees.
Self Storage Licensing Pros and Cons
The biggest advantage of licensing is that independent self storage business owners stay that way: independent. They’re only “borrowing” intellectual property and the licensor remains completely hands-off. By borrowing names and trademarks, the licensee doesn’t need to break into the market, because the licensor is already established within the market. That means more visibility for the business and reduced costs when it comes to promoting the business.
There are really only two disadvantages to licensing. If the licensor’s name becomes tarnished due to bad press or negative social media content, it will impact the licensee since they are using the same name. And of course, there are fees associated with licensing, but they are going to be a lot less than franchising fees.
Unfortunately, licensing opportunities in the self storage industry are slim, as most established companies are mainly looking to franchise. But that’s all changed with the Storelocal® Brand Program.
Licensing Through the Storelocal Brand Program
Storelocal®, the nation’s only cooperative created by independent self storage company operators, exists to solve independent owners’ problems – one of them being visibility and the inability to compete with self storage REITs. So, we created the voluntary Storelocal Brand Program.
The Storelocal Brand Program allows you to use our branding, but stay completely independent! Providing economies of scale, marketplace awareness, and online visibility, using the Storelocal Brand enables independent owners like you to focus on what really matters: converting leads to rentals, running your business, and finding your next deal. Learn more about the Storelocal Brand Program and pricing.