Franchising and Licensing in Emerging Countries
IS FRANCHISING OR LICENSING A GOOD BUSINESS OPPORTUNITY IN EMERGING COUNTRIES?
Anybody who has been walking along the high streets of any main European or US cities for sure has noticed the big amount of McDonalds, KFC, Starbucks, Zara or Benetton stores, to mention just few examples, but maybe few people has wondered what is the business and legal structure behind this activity.
The answer is franchising and licensing, a concept that was born in the 19th century, became popular in the USA since the second half of the last century and now is being expanded to developing countries.
Franchising and licensing cover a wide range of business activities, being the most popular ones restaurants (not necessarily fast food) and fashion. Some other activities, like those related to learning or healthcare, also have proved to be able to be successful in developing countries.
Franchised and licensed products and services are specially addressed to the middle class, that is, they are products and services of a good quality but not necessarily very highly priced, opposite to the luxury market. The potential customers for this segment of the market are therefore a huge amount of people in developing countries.
The origin of any franchise is a successful business that can be expanded, both domestically and internationally, through franchises, that is, a replication of the initial business. The franchisee receives all the training, support, advice and know how necessary to start and run his or her own business. The franchisee also receives all or the most of the materials and merchandises necessary for the setup of the franchised outlets and the supply of the products or services to the customers. Obviously, the franchisee also receives the licenses to use the brand and logos pertaining to the franchisor. License agreements are slightly different from franchise agreements; in general they include less control and support by the licensor towards the licensee. From now on this article will mention only “franchising” but the most of the topics are also applicable to licensing.
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