Another contractual entry mode is franchising, which is when one company (the franchiser) supplies another (the franchisee) with intangible property and assistance over an extended period of time. Franchisers typically receive compensation as flat fees or royalty payments for use of an asset, which is commonly a brand name or trademark.
Franchising is a low-cost and low-risk entry mode into new markets, allows for rapid geographic expansion, and makes use of local managers’ cultural knowledge.
Yet, managing franchisees across several nations can become cumbersome, and such agreements may reduce organisational flexibility for franchisees.