Royalty Rate Structure in Case of Franchising

Ivan Kotliarov
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Ivan Kotliarov: Cand. Sc. in Economics, Associate Professor, Chair Of International Finance and Financial Markets, Faculty of Economics, National Research Uniersity Higher School of Economics

Annals of Economics and Finance, 2011, vol. 12, issue 1, 139-156

Abstract: The present article contains an analysis of differences between licensing and franchising. It is demonstrated that models of royalty rate calculation developed for licensing should not be applied to franchising as benefits received by licensee and franchisee are different. It is proposed to include in the model of royalty calculation the risk reduction generated by franchisor¡¯s effective technologies and managerial support that are given to franchisee. It is demonstrated that franchisee may wish to acquire the franchise even if franchisor takes the full amount of additional income or if this additional income is negative.

Keywords: Royalty; Royalty rate; Franchising; Franchisee; Franchisor; Risk; Income (search for similar items in EconPapers)
JEL-codes: C51 L11 L24 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2011:v:12:i:1:p:139-156

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