Franchising

 Franchisee  Franchiser

Franchising
 Grants business systems and property rights  Franchisee operates under franchisers name  Follows franchisers policies and procedures  Franchiser receives compensation from the franchisee  Allows for quick expansion into new markets  Must continuously provide support to franchisee  Still a lack of control over everyday

operations

Technology Transfer  Nature of technology/service is at the core



Includes price, method of transfer, terms of exchange, buyer-seller relationship

 Exclusive products/service can charge a

premium price, common products/service cannot

Franchising
Advantages  Low financial risks  Low-cost way to assess market potential  Avoid tariffs, NTBs, restrictions on foreign investment  Maintain more control than with licensing  Franchisee provides knowledge of local market

Disadvantages


Franchising may inhibit the firm's ability to take profits out of one country to support competitive attacks in another. A more significant disadvantage of franchising is quality control. The geographic distance of the firm from its foreign franchisees can make poor quality difficult for the franchisor to detect.