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when the franchisor manufactures a product and licenses a dealer to sell it blank, a distribution method of franchising exists.

User Kalpa
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Franchising arises when a franchisor allows a dealer to exclusively sell its products. This distribution method is reflected in the business models of car manufacturers and fast-food chains. It aims to promote competition but needs careful regulation to prevent anti-competitive effects.

  • When the franchisor manufactures a product and licenses a dealer to sell it exclusively, a distribution method of franchising exists.
  • This type of agreement, often seen in arrangements between auto manufacturers like Ford or General Motors and their network of individual dealerships, can be beneficial for promoting competition within a brand's authorized dealers.
  • However, such agreements need to be carefully structured because if exclusive contracts are given to a single large retailer, it may lead to anticompetitive effects, harming the market and reducing consumer choices.
  • In general, a franchise refers to a licensing relationship where the franchisor provides the franchisee with the rights to use its business model, brand, and support services in exchange for a franchise fee and ongoing royalties.
  • This business strategy has been widely adopted in various industries, notably in fast-food chains like McDonald's.
  • Exclusive dealing between manufacturer and dealer under franchising agreements aligns with efforts to establish brand consistency and competitive dealership environments.

User Jameer Mulani
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