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Licensing, Franchising, and Other Contractual Strategies (Two Types of…
Licensing, Franchising, and Other Contractual Strategies
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Licensing
A licensing agreement specifies the nature of the relationship between the licensor (owner of intellectual property) and the licensee (the user).
Trademark Licensing
Involves a firm granting another firm permission to use its proprietary names, characters, or logos for a specified period of time in exchange for a royalty.
Copyright Licensing
A copyright gives the owner the exclusive right to reproduce art, music, literature, software, and other such works, as well as prepare derivative works, distribute copies or perform or display the work publicly.
Know-How Licensing
Involves a contract in which the focal firm provides technological or management knowledge about how to design, manufacture, or deliver a product or a service.
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Franchising
Most typical arrangement is business format franchising, in which franchisor transfers to the franchisee a total business method – including production and marketing methods, sales systems, procedures, training, and the use of its name.
Advantages for franchiser :check:
Low investment;
Can internationalize quickly to many markets;
Low effort, once established; and
Can leverage franchisees’ local knowledge.
Disadvantages for franchiser :green_cross:
Maintaining control over franchisees may be difficult;
Franchiser has limited control over its assets abroad; and
Risks creating a future competitor
Master franchiser
An independent company authorized to establish, develop, and manage the entire franchising network in its market. E.g., McDonald's in Japan.