When considering buying a business franchise, it is important to consider opportunities abroad as well as in the domestic market. For this reason, it is highly advantageous for the potential franchise buyer to familiarize himself with the international franchising and licensing market.

Franchising and licensing involve a minimal commitment of resources and effort on the part of the international marketer, and are easy ways of entering the foreign markets. Under international licensing, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property (such as patents, trademarks, copyrights, technical know-how and marketing skill).

The monetary benefit to the licensor is the royalty or fees that such a licensee pays. In many countries, the government regulates such fees or loyalties. These feeds do not exceed five per cent of the sales in many developing countries. A licensing agreement may also be one of cross licensing, wherein there is a mutual exchange of knowledge and/or patents. In cross licensing, a cash payment may or may not be involved.

Franchising is a form of licensing in which a parent company (the franchiser) grants another independent entity (the franchisee) the right to do business in a prescribed manner. This right can take the form of selling the franchisors products, using its name, production and marketing techniques or general business approach. One of the common forms of franchising involves the franchisor supplying an important ingredient for the finished product.

The major forms of franchising are manufacturer-retailer systems, manufacturer-wholesaler systems and service firm-retailer systems. International franchising/licensing agreements have grown very substantially. As an entry strategy, franchising and licensing requires neither capital investment nor knowledge and marketing strength in foreign markets.

Another advantage of franchising is that it may be employed as a pre-emptive strategy against competitors by combing the foreign markets before the competitors is able to enter. In addition, franchising has been used by many companies to harvest their obsolete products.