This chapter examines three basic components that are features of all franchise systems: royalties, trademarks, and long-term contracts. It demonstrated how these components function and, in particular, how they impact franchisee survival rates at King Cleaners, Sign Masters, and Star Muffler. Competition among franchisees changes the value of the trademark. It is noted that the prices for services given by Star Muffler is a major source of contention among franchisees. Franchisees and franchisors agree that the royalty is a “right” of the company, the price for their expertise, and assumed to be an operating expense for franchisees. The long-term nature of contracts is one of the defining characteristics of franchising, and it is an aspect of the strategy that seems to serve franchisors and franchisees well. Furthermore, it is believed that the short-lived tenure of franchisees is surely due to something other than contracts, trademarks, and royalties.
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