Have strong geographic coverage- due to franchisee investments-and the motivation of franchisees as owner-operators. They should not get bogged down in policy disputes with franchisees or charge excessive royalty fees. Involves a contractual arrangement between a franchisor (a manufacturer, wholesaler, or service sponsor) and a retail franchise. Allows franchisee to conduct business under an established name and that pattern of business.
a. Franchisee pays an initial fee and monthly percentage of gross sales in exchange for the exclusive rights to sell goods and services in an area.
b. In production/trademark franchising- a franchisee acquires the identity of a franchisor by agreeing to sell the latter's products and/or operate under the latter's name
c. In Business format franchising- more interactive relationship between a franchisor and a frachisee. Ex- Mcdonalds
d. Manufacturer-retailer. Gives independept frachisees the right to sell goods and related services through a licensing agreement. Ex- General motors page 99