What Are the Differences and Similarities Between Licensing and Franchising

question 12

Essay

What are the differences and similarities between licensing and franchising as means of entering the international market? What are the pros and cons of both licensing and franchising?

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Definitions:

Direct Expenses

Direct expenses are costs that can be directly traced to a specific cost object, such as a product, department, or project.

Departmental Contribution Margin

The difference between sales revenue and variable costs for a specific department, indicating its contribution to the overall profit.

Contribution Margin

The amount remaining from sales revenue after variable costs are subtracted, indicating how much contributes towards covering fixed costs and generating profit.

Indirect Expenses

Costs that are not directly attributable to the production of goods or services, such as utilities, rent, and administrative expenses.