The Pros And Cons Of Chick-Fil A

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Licensing and franchising were of interest to this author as 10 years ago this author was interested in franchising a Chick-Fil-A, and now through the research for this post, now realized that Chick-Fil-A is a licensed business and not a franchise. Explanation of Key Term A license is an agreement in which a fee is paid from one party to use the property right of the other party. This fee is based on the revenue of the business for a limited period agreed upon between the licensor and licensee. Similarly, a franchise is another modality in which a franchisee is given the rights to use the business name, strategies and operating procedures after paying a fee. As the franchisee pays the franchisor royalties based on a percentage…show more content…
Licensing” (McDonald’s vs. Starbucks and Chick-Fil-A) highlighted the benefits and differences between McDonald’s, Starbucks and Chick-Fil-A from a franchising and licensing perspective. Therefore, the author’s note and compares the significant difference in cost between the two modalities. As license businesses, such as Starbucks and Chick-Fil-A are less cost prohabitive than McDonald’s, a franchise. Moreover, for Chick-Fil-A and Starbucks, licenses are granted to individuals who are considered partners paying respective initial fees of $5,000 for Chick-Fil-A and $315,000 for Starbucks. The terms for each of these operations allowed their partners to share among the profits, pays fees and product expense, for a specify period as the licensee earns no equity in the business. Unlike, license businesses, McDonald’s is a franchise, as franchisee select an existing location and pay the fair market price for the building, in addition to 50-75% of the annual sales revenue of the previous year. Even though, franchises have many fees that are paid monthly and annually, McDonald’s franchises can yield annual profits as high as $2 million…show more content…
businesses to launch out into international markets to establish US-based franchises. Push factors such as saturated domestic markets and decreasing profits has contributed to the reactive posture of businesses to seek new opportunities (Baena, 2012). During the years 1971-1985 these businesses open at a rate of 17% annually, with data indicating that in 2006, 52% of US franchises opened outside of the U.S. as compared to 34% in 1989 (Aliouche, & Schlentrich, 2011). Moreover, US based companies have focused on driving business and expanding into emerging markets where 70% of franchises have been established. In fact, emerging markets such as Brazil reported 48 billion in franchise sales in 2010, with over 127,000 franchises. Additionally, Russia also reported openings 9000 units, China reports 82,000 units growing at a pace of 49%, and India, franchises opened at 30% annually (Hoffman, Munemo, & Watson, 2016). Therefore, emerging untapped markets are beneficial to US business as less capital is required for entry, however, franchising is also desired in nations with high per capita income where there are cultural and political similarities to the U.S

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