Question

Madison Hotels sold a foreign organization the right to use its brand name and operating know-how in return for a lump-sum payment and a share of the profits. This is an example of

Answer 1

This sale of brand name and operating know-how by Madison Hotels to a foreign organization in return for a lump-sum payment and profit share is an example of Franchising.

What is Franchising?

Franchising is the business relationship between the franchisor and the franchisee in which the franchisor (e.g. Madison Hotels) establishes the brand's trademark or trade name and a business system. The franchisee pays a royalty and often an initial fee for the right to do business using the franchisor's brand name and system.

Thus, this business relationship between Madison Hotels and the foreign organization is an example is of Franchising.

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