How is compensation typically addressed in international licensing and franchising contracts? What basic issues should be addressed in such contracts?

What will be an ideal response?

Compensation under a licensing agreement is called a royalty. The royalty is usually paid to the licensor in the form of a flat fee, a fixed amount per unit sold, or, most commonly, a percentage of the sales of the licensed product or service. Although the royalty amount is often determined by prevailing market forces, royalties of 3-5 percent of sales are typical and have long been viewed as reasonable and appropriate. Like licensing agreements, franchising agreements are spelled out in formal contracts, with a typical set of terms. The franchisor generally receives a fixed payment plus a royalty based on the franchisee's sales for the rights to use the franchisor's name, trademarks, formulas, and operating procedures. The franchisee usually agrees to adhere to the franchisor's requirements for appearance, financial reporting, and operating procedures. The basic issues covered in the legal contract should include 1. specifying the boundaries of the agreement, 2. determining compensation, 3. establishing rights, privileges, and constraints, and 4. specifying the duration of the contract.