Economic reasoning of a franchising royalty rate

<p>The study is devoted to the problem of defining and measuring the franchising royalty rate. It contains one picture, 9 tables and 52 pages and is based on 46 sources of Russian and foreign authors. Key words: Franchising, Russian franchise system, flexible royalty, fixed royalty, initial payment, reasoning of royalty rates.</p><p>Nowadays there is no clear evidence of any sort of an applied model that will allow a franchisor to define the royalty rate so that a franchisee could buy a franchise for a reason as well as understanding the basis on which the royalty rate is calculated.</p><p>On one hand, these days such a model of doing business as franchising lies out of Russian scientific society scope, and there is no evidence of any kind of econometrical model estimating franchisee payments to a franchisor. On the other hand, the growing popularity of franchising in Russia due to its benefits from using the efforts of independent entrepreneurs while expanding the business-model on a country (or sometimes even international) scale. All of this makes a franchising&nbsp; model an important problem in solving the crucial problems of business and evaluating the essence of franchising model on a scientific level.</p><p>The object of the study is then Russian franchise system; the subject of the study is royalty rate. More than to explore the literature to the stated problem, the aim of this study is to consider econometrical model and the factors which have a direct impact on an unpopular but not any less important question of a royalty rate.</p><p>Speaking of a novelty of the study, it is essential to mention that neither theoretical nor empirical research has been reached their goals in creating the adequate model of Russian franchise system which could satisfy both a franchisor and a franchisee. For this reason we believe that the present research will improve an understanding of problems which take place in the modern business activities.</p><p>The paper is organized as follows. In Chapter 1 we give a brief literature review on a franchising business model, define the main characteristics of the relationship between franchisor and franchisee, and mark out the positive and negative factors which can help to answer the research question. Chapter 2 describes the research methodology and the specific features of Russian franchising in the light of which we can acquire the expected result. Then, in Chapter 3 one can see the findings obtained by framing the theoretical information with a complex econometrical model in order to analyze Russian franchising system and determining the royalty rate. Finally, a conclusion contains discussion of these findings and gives an overall view that can help us to answer the question of quantitative estimating of a royalty rate.</p>