Advantages
(i)
a) Lower entry barriers compared to building a brand from scratch.
b) Access to franchisor support, including training, marketing, and operational guidance. c) Proven business model with brand recognition, reducing market entry risks. (ii) Disadvantages a) Limited operational control, as franchisees must adhere to franchisor policies and procedures. b) O ngoing fees, including royalties and advertising fund contributions, which can reduce profit margins. c) Contractual obligations may restrict decision-making regarding pricing, suppliers, and business operations. (iii) Restrictions for Foreign Investors: While franchising is generally open to foreign investors, some franchisors may impose residency or financial requirements. Additionally, securing a visa (such as an E-2 Investor Visa) may be necessary for those planning to manage the franchise directly. 5.3.2 Licensing Agreements A licensing agreement grants permission to use a company’s intellectual property (IP), such as brand names, proprietary technology, or patents, in exchange for a licensing fee. Unlike franchising, licensing does not involve a standardized business model, giving the licensee more flexibility.
Advantages
(i)
a) Greater flexibility in adapting the brand or product to local market needs.
b) Fewer regulatory requirements and operational restrictions compared to franchising. c) No requirement to follow a rigid operational structure set by the licensor. (ii) Disadvantages a) Typically does not include business training, marketing, or operational support from the licensor. b) Limited exclusivity, as the licensor may grant rights to multiple licensees within the same market.
c) Dependency on the licensor’s brand reputation and continued success.
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