INTERNATIONAL EXPANSION THROUGH FRANCHISING: AN ECONOMIC PERSPECTIVE
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Abstract
International franchising has become a prominent strategy for firms seeking global growth, offering a rapid path to scale with limited capital investment. This article analyzes the key economic drivers that make franchising an attractive mode of international expansion and examines the benefits franchisors reap, such as accelerated growth, risk sharing, and efficiency gains. It also discusses the economic challenges and risks franchises face abroad, including cultural and regulatory hurdles, reduced control, and financial vulnerabilities. Drawing on relevant economic theories – notably resource scarcity and agency theory – and using real-world case studies, the analysis highlights how franchising enables firms to leverage local entrepreneurship while expanding globally. The article is structured in a scholarly format with a review of literature and theory, a discussion of drivers and challenges, case examples, and a conclusion. The findings underscore that while international franchising can deliver significant economic advantages in scaling and market entry, success depends on careful management of risks and alignment of incentives across borders.
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