LICENSING, FRANCHISING, AND OTHER
CONTRACTUAL STRATGIES
Franchise- mixture of upfront and ongoing fees in order
to license the brand name and supporting resources of a
parent company.
Franchising- agreement between a franchisor and a
franchise that allows the franchisee to market and
distribute products and services using the techniques
What does a Franchise offer to Franchisees?
Steady returns from a proven concept- When a person
becomes a franchisee, that person is buying into an idea
which has proof of concept- this is one of its primary
sources of appeal.
Low Risk/Low Hurdle Entry- franchise business is
already a proven concept, there is a smaller chance that the
franchise business will fail to turn a profit.
HOW TO FRANCHISE YOUR BUSINESS
1. Make sure your business is franchise-ready
2. Issue your franchise disclosure document
3. Register your trademarks
4. Prepare your operations manual
5. Establish your franchise company
6. Register and File your FDD
7. Create your franchise sales strategy and budget
4 BENEFITS OF TRANSITIONING INTO A
FRANCHISE MODEL
1. Expansion with minimized risk
2. Ongoing revenue stream
3. Management with vested interests
4. Brand exposure development
Top 10 Important Franchise Contract Terms
1. Franchise Territory
2. Initial Purchase Fee
3. Franchise Trademarks
4. Renewal Rights
5. Installment Terms
6. Royalty Fee
7. Franchise Disclosure Document
8. Due Diligence
9. Personal Guarantee
10. Master Franchise
Job Franchise- generally a low-investment franchise
(often home-based) that can be operated alone or with
minimal staffing (less than 5).
Some examples are:
• Cell phone repairs and accessories
• Cleaning services
• Event planning
• Plumbing
• Travel agency
Product Franchise- or Distribution Franchise, these
product-driven franchises are where the franchisee
distributes the parent company products and some
related services.
Some examples are:
• Cars and car repair parts (GMC, Ford,
Exxon, Goodyear Tires)
• Computers (Dell, Asus, Hewlett Packard)
• Bicycles
• Vending machines
Business Format Franchise- most popular of all the
types of franchising, and is what most people think about
when talking about the franchising industry.
Some examples are:
 Fast food (Chick-Fil-A, McDonald’s, Subway,
KFC)
• Restaurant (Olive Garden, Longhorn, Golden
Corral)
Conversion Franchise- a hybrid, it is a method of
growing franchise systems wherein a franchise enters
into a relationship with an existing company and
converts it into a franchise unit.
Examples of this type of franchising are popular
among these industries:
• Electricians
• Plumbing services
• Professional service companies
Investment Franchise- usually a large-scale business that
requires a huge capital investment (huge compared to
other franchising options). The franchisee is actually a
major investor who provides the money and management
team, or sometimes engages their own franchisee, to
operate the business. (Example are hotels, large
restaurant)
License- obtained from local government authorities
to conduct certain types of business activities
Licensing Agreement- allowing party to use or earn
revenue from the property of someone else
Intellectual Property- owned and legally protected
by a company from outside use
Patent Licensing- licensee gets a license to use a part
of the process
Copyright- legal right of the owner of intellectual
property
Copyright Licensing- used with content, audio,
video and artwork
Trademark Licensing- can be any word, phrase,
symbol, design or a combination of these things that
identifies your goods or services
Exclusive- licensee to use the licensor’s intellectual
property in a specific geographic area
Non-Exclusive- there is more than one licensee
Perpetual- licensee buys the license one and can use
the intellectual property for life.
Term- licensee pays to use the intellectually property
for a certain duration
CULTURAL ENVIRONMENTS OF
INTERNATIONAL BUSINESS AND TRADE
Cultural Environment- set of values, beliefs attitudes
and behaviors that are shared by a particular group of
people.
CULTURAL ENVIRONMENTS IMPACT OF
INTERNATIONAL BUSINESS AND TRADE
Cultural Diffusion- spread of cultural elements such
as cuisine, music, art, fashion and language to new
regions. Ex. The popularity of sushi in the United
States.
Cultural Exchange- people from different cultures
come into contact with each other through the
movement of goods and services.
Globalization of Culture- spread of Western
consumer culture and fast food chains to various parts
of the world
Cultural Preservation- demand for artisanal
products from specific regions can incentivize the
continuation
Impact on language- adoption of certain words or
phrases from other language known as linguistic
borrowing
Religious Impact- new religious beliefs and
practices to a region.
Art and Literature- new forms of art and literature
which can enrich their cultural experience
Food and Cuisine- introduce people to new foods
and cuisines
Values and beliefs- impact on people’s values and
beliefs
Cultural Hybridization- blending of different
cultural elements to create unique hybrid cultures
Culture Identify and Globalization- influence of
multinational corporations can challenge and reshape
cultural identities
ROLE OF GOVERNMENT IN
INTERNATIONAL TRADE IN TERMS OF
CULTURAL ENVIRONMENT
-Access to cultural environment of foreign countries
-Balance of cultural environments
-Facilitating environments
-Influencing cultural environment
INTERNATINAL LAWS AND PROVISIONS IN
INTERNATIONAL BUSINESS AND TRADE
WORLD TRADE ORGANIZATION (WTO)
Most-Favored-Nation (MFN) Principle: WTO
members must treat all other members equally,
granting them the same favorable trade terms and
conditions.
National Treatment: WTO members are required to
treat foreign goods and services no less favorably
than their domestic counterparts.
Dispute Settlement Mechanism: Provides a process
for resolving trade disputes among member countries.
UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL
SALE OF GOODS
Provides a uniform set of rules for international sales
contracts, covering issues like contract formation,
performance, and remedies for breach.
Customs Valuation Agreement- principles for
determining the customs value of imported goods,
ensuring transparency and consistency in customs
valuation
Berne Convention for the protection of Literary
and Artistic Works- Protects the rights of creators
by providing copyright protection for literary and
artistic works across borders.
Paris Convention for the protection of Industrial
Property- protection for industrial property rights,
including patents, trademarks, and industrial designs,
in participating countries.
Agreement on Trade-Related Aspects of
Intellectual Property Rights- establishes
international standards for intellectual property
protection, including patents, copyrights, and
trademarks.
Bilateral Investment Treaties- agreements between
two countries that provide protections for foreign
investors, including safeguards against expropriation
and discrimination.
North American Free Trade Agreement- promoted
trade and investment among Canada, Mexico, and the
United States before being replaced by the United
States-Mexico-Canada Agreement (USMCA).
Association of Southeast Asian Nations Free
Trade Agreements- agreements among ASEAN
member countries aimed at reducing trade barriers
and promoting economic cooperation.
European Union (Eu) Trade Agreements- trade
agreements with countries and regions around the
world, facilitating trade and market access.
Trans-Pacific Partnership (TPP) / Comprehensive
and Progressive Agreement for Trans-Pacific
Partnership (CPTPP)- trade and economic
integration among Pacific Rim countries.
African Continental Free Trade Area (AFCFTA)-
create a single continental market for goods and
services across African Union member states.
World Intellectual Property Organization (WIPO)
Treaties- treaties and agreements that protect
intellectual property rights at the international level.
International Chamber of Commerce (ICC)
Incoterms- set of international commercial terms that
define the responsibilities of buyers and sellers in
international trade transactions.
United Nations Convention on the Law of the Sea
(UNCLOS)- use and management of the world's
oceans, including maritime trade and resources.
International Air Transport Association (IATA)
Regulations- international aviation industry,
including rules for air cargo and passenger transport.
International Telecommunication Union (ITU)
Agreements- global telecommunications standards
and regulations.
International Monetary Fund (IMF) And World
Bank Agreements- financial support and assistance
for international development and economic stability.
International Labor Organization (ILO)
Conventions- labor standards and promotes decent
working conditions globally.
Kyoto Protocol and Paris Agreement- climate
change and emissions reduction, impacting industries
and trade related to environmental sustainability
FOREIGN TRADE ZONE
Foreign Trade Zone- part of the special economic
zones that allow companies to reduce import duties
and other costs
ADVANTAGES OF FTZ
Duty Elimination- Zero duty is due if goods are re-
exported or destroyed.
A. Duty exemption on re-exports
B. Duty elimination on waste, scrap, and yield loss
Duty Reduction- companies can choose to pay the
duty rate of finished products that have a lower tariff
than its foreign components.
A. Relief from inverted tariffs- free trade zones offer
duty reduction
Duty Deferral- designated as outside of Customs
requirements and laws, meaning that goods coming
into these zones do not incur duties until they exit the
zone
Reduction of taxes and fees
A. Ad Valorem Tax exemption- fee charged on
existing inventory.
B. Weekly of taxes and fees- MPF is only paid on
goods entering the U.S. Customs territory.
Drive supply chain efficiencies
A. Zone to zone transfers- merchandise may be
transferred under bond from one FTZ to another
without payment of duty.
Enhance global competitiveness- FTZs can help
businesses reduce production, transaction, and
logistics-related costs by lowering effective duty
rates, allowing special entry
A. Creating or retaining jobs and encouraging
investment- helping local employers remain
competitive, zones can contribute to maintaining or
boosting employment opportunities.
DISADVANTAGES OF FTZ
Threat to intellectual property- imports are freely
traded, domestic producers are often able to copy the
products and sell them as knock-offs without fear of
any legal repercussions.
Unhealthy working conditions- many countries lack
labor protection laws, workers may be forced to work
in unhealthy and substandard work environments.
Less tax revenue- member countries are no longer
subject to import taxes, they need to think of ways to
compensate for the reduced tax revenue.
WHY SHOULD YOU SET UP A COMPANY IN
THE PHILIPPINES FREE TRADE ZONES?
FTZ company in the Philippines is not subjected to
any corporate income tax for up to six years. This tax
benefit can be extended to eight years provided the
terms are met.
HOW TO BE PART OF FTZ?
1. Planning and Strategizing
2. Check the pre-registration requirements
3. Register the company
4. Apply for required business licenses, permits, or
visas
5. Open a corporate bank account
6. Compliant with the government laws
FTZ IN PHILIPPINES
According to PEZA, there are over 400 FTZs
operational in the Philippines.
-Freeport Area of Bataan (FAB)
-Clark Freeport and Special Economic Zone (CFEZ)
-Cagayan Special Economic Zone and Freeport
(CSEZFP)
-Cavite Export Processing Zone (CPEZ)
-Subic Special Economic and Freeport Zone
-San Carlos Ecozone