Short Notes: Franchising
Posted by Ripon Abu Hasnat on Tuesday, May 27, 2014 | 0 comments
A
special type of vertical relationship between two firms usually referred to as
the "franchisor" and "franchisee". The two firms generally establish a contractual
relationship where the franchisor sells a proven product, trademark or business
method and ancillary services to the individual franchisee in return for a stream
of royalties and other payments. The
contractual relationship may cover such matters as product prices, advertising,
location, type of distribution outlets, geographic area, etc. Franchise agreements generally fall under the
purview of competition laws, particularly those provisions dealing with
vertical restraints.
Franchise
agreements may facilitate entry of new firms and/or products and have efficiency
enhancing benefits. However, franchising
agreements in certain situations can restrict competition as well.
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