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| Author: | Tikoo, S. Nair, S. |
| Title: | Variable royalty rates for improving franchise channel coordination |
| Journal: | Decision Sciences
1999 : SPRING, VOL. 30:2, p. 469-479 |
| Index terms: | FRANCHISING DECISION MAKING ECONOMICS |
| Language: | eng |
| Abstract: | A business format franchisor obtains a major part of its revenues from franchise royalties, which are typically a fixed percentage of franchisee gross sales. When a fixed royalty rate is used and the marginal costs of operating the franchise are increasing, the franchise does not have an incentive to increase sales beyond a certain "optimal" volume. The authors present a model that recommends the use of a variable franchise royalty rate for extending this optimal sales volume. |
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