McDonald's and other fast food restaurants have benefitted tremendously by using franchising as a mode of entry into different countries. What are the benefits of franchising and how does it differ from other modes of entry?

Question

What will be an ideal response?

Answer 1

Franchising involves a contract between a parent company (franchiser) and a franchisee that allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to franchise-wide policies and practices. This definition is very similar to that of licensing since franchising itself is another variation of licensing strategy. McDonald's is a good example of the success that can be achieved through franchising. It has great appeal to local entrepreneurs who are very anxious to learn and apply franchising, which has been found to be very successful in the United States. The specialty retailing industry favors franchising as a market entry mode. Many of the famous American restaurant chains have used franchising to enter and to develop in other countries. McDonald's has a well-known global brand name and a business system that can be easily replicated in multiple country markets. It also provides its franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. Franchising is a market entry strategy that is typically executed with less localization than licensing.