Franchising Business Model in Intra-Group Services

01 April 2011
By Dr. Emmanuel Llinares and Dr. Stuart Harshbarger

Franchising is a commonly used business model for many companies. While franchising is naturally associated with retail- and consumer-oriented industries, the format can be applied to a wide range of situations and may take different forms. Franchising refers to the provision of valuable intellectual property and centralized services by one entity (the franchisor) to another (the franchisee) for a franchise fee.

In this article, the fourth in a series of ten articles produced by International Tax Review on tax-effective intellectual property management, NERA Vice President Dr. Stuart Harshbarger and Director Dr. Emmanuel Llinares consider how the franchising paradigm may be applied in transfer pricing. Ultimately, the franchising paradigm may offer a pragmatic solution for intragroup arrangements where one entity provides access to both intellectual property and services. It provides an attractive framework to simplify the administrative business models of multinational with somewhat centralized intellectual property and services.