The Advantages and Disadvantages of Franchising in France

The Advantages and Disadvantages of Franchising in France 1 Running head: International Trade: Licensing and Franchising The Advantages and Disadvantages of Franchising in France Presented by: Deon E. Boswell Of Team McWorld University of Maryland University College AMBA606 November 4, 2005 The Advantages and Disadvantages of Franchising in France 2 Executive Summary The tremendous growth in franchising over the last decade can be traced directly to the explosion of growth in international trade and globalization. As organizations, attempt to enter new markets they are finding that direct investment via subsidiary creation is an expensive proposition and that their capital expenditures could be used for other opportunities that pose less risk. However, the lure of expansion into growth markets is driving organizations to look at different ways to get their products or services into the hands of consumers. Licensing and franchising are both methods used to extend an organization.s reach while mitigating its risk to the vagrancies of foreign government regulations and economic policies. Licensing and franchising offer several advantages and disadvantages to organizations seeking to expand their reach outside of their domestic borders, the perspective of this paper is from an organization that would like to extend its reach and as result the advantages and disadvantages presented will be viewed from a licensor and franchisor perspective. The advantages to licensing a product are (Goodwin, 2005): Recoup part of R & D expense Chance to enter foreign market without major capital investment Gain income from information or technology with limited commercial useful life. Opportunity to form an initial relationship with a potential joint venture partner Method to enter a market where other entry mechanisms might be prohibited Few long term obligations unless separately called for in the contract Gain technology