The Best Term PPER

Example Term Paper Format ECON 460 November 19, 2011 Abstract The following paper is an example
of the appropriate stlyle, layout and format for an term paper or essay in an economics course. All
papers should have a title page that contains the following: 1. Title of the Paper 2. Course Number and
Instructor 3. Your name and student number 4. Date Any graphs should be on seperate pages that are
not counted as part of the written page requirements. All graphs must be discussed and explained
within the body of the text. Newspaper and magazine articles may be cited but do not count as part of
the required references. 1 A REVIEW OF FRANCHISE THEORY INTRODUCTION In service based industries
one of the fastest growing forms of market structure is that of franchise agreements. Certain aspects of
franchise contracts tend to be idiosyncratic in nature thereby attracting a great deal of interest by
academics and business analysts in recent years. Various explanations have been proposed for the
widespread use of franchise contracts in certain industries. While a great deal of the franchise contract
has been explained in the literature, there remains certain aspects of this form of arrangement that has
yet to be addressed. This paper intends to address two of these issues as well as proposing an
alternative modelling approach to franchise contracts. The second section of this paper describes the
basic structure of franchise contracts. The third section discusses the various explanations that have
been proposed to explain franchising. The fourth section sets two aspects of the franchise contract that
has not been addressed in the literature. The Örst of these is existence of both corporate owned outlets
and franchised outlets within the same organization. Some authors have predicted that one form or the
other would come to dominate the organization. Others have tried to explain under which conditions
one form would be preferred by the parent company (or Franchisor). Yet many organizations exist as a
mixture of both types of contracts and have chosen both forms of contract when expanding the number
of outlets. The second unexplained observation is apparent rigidity in various organizationsífranchise fee
structure; both over time and between individual franchisees. This section introduces spatial or
geographical considerations to the problem of franchising. When placed in a spatial context a testable
hypothesis is proposed in which both of the issues identiÖed can be explained. 2 STRUCTURE OF THE
FRANCHISE CONTRACT A basic result derived in modern property rights literature is that when any given
set of rights is exchanged, the principals involved will select the institutional framework that minimizes
the sum of production and transaction costs1 . The most commonly observed of these arrangements (or
governance structures) are price mediated markets and centralized employment within Örms2 . These
are not the only forms of arrangement within which transactions are carried out, and the distinction
between the two mentioned above is not as clear as it is suggested. An example of an alternative
institutional framework is a franchise arrangement, and the purpose of this paper is to analyze the
nature and purpose of franchise contracts. In a franchise contract, a parent company contracts out the
right to produce or market its product to an agent. Contractual stipulations involve rules governing the
behavior of the agent including pricing, mode of production, and territorial or market restrictions. A
frequently observed feature of a franchised industry is that certain aspects of the parent companyís
product have limited scale economies that require production at the local market level. A principle
characteristic of franchise contracts is the agentís right to use a national brand name in exchange for a
share of the proÖts. The brand name is a signal to consumers in a local market that the agent supplies a
product of a certain quality. The e§ectiveness of the brand name as a quality signal will decide its value
to consumers. Given the nature of brand names and the characteristics of certain industries that rely on
them, franchise contracts as a form of governance structure may be the most e¢ cient for enhancing and
protecting the value of the brand name. 1Williamson, O. E., "Transaction Cost Economics: the
Governance of Contractual Arrangements", The Journal of Law and Economics, 22, Oct. (1979) 223-261
2Cheung, S.N.S. "The Contractual Nature of the Firm," The Journal of Law and Economics, 26 April (1983)
1-21. 3 Franchise contracts have certain common characteristics3 . The franchisor sells or leases the
right to produce or sell some product to a franchisee. Written into the contract are various obligations
and commitments required by both parties. First, with the right to use the franchisorís brand name, the
franchisor also agrees to supply various types of assistance. This includes orientation with the
production process, managerial and accounting assistance, site selection and development, and any
ongoing assistance or advice, as required. The franchisor also takes responsibility for national marketing
and advertising also any research and development of the product. Second, the franchisee agrees to
operate the business in the manner stipulated by the franchisor. This includes hours of operation,
pricing scheme, inventory levels, and adherence to the operating manual ñ if one is supplied. Third, the
franchisee agrees to pay royalties to the franchisor. This is usually in the form of a non-linear outlay
schedule, comprised of a Öxed fee plus a share of the revenues. Fourth, there will be a monitoring and
auditing clause in the contract. This may be spelled out explicitly, but will usually give the franchisor
arbitrary and discretionary power. Fifth, the contract will have a termination clause. The termination
clause will heavily favour the franchisor who can practically end at will. The franchisee, on the other
hand, also can terminate, but at unfavourable terms, usually incurring a heavy penalty. Finally, the
contract will contain miscellaneous clauses dealing with sale of the franchise, rights of heirs, territorial
restrictions and any other conditions that may be speciÖc to the particular product. 3See, for example,
Rubin, P. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law and
Economics, 21 (1978) 223-233; or Caves, R.E. and Murphy, W.F. "Franchising: Firms, Markets and
Intangible Assets," Southern Economic Journal, 42 (1976)

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Example Term Paper Format ECON 460 November 19, 2011 Abstract The following paper is an example

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