Thevalueofthecopyrightcanbeestimatedusingthesecash
flows and the cost of capital that has been supplied:
The value of the copyright, with these assumptions, is
$518,547 (which is the sum of $216,494 and $302,053).
Franchises
A franchise gives its owner the right to market or sell a
productorserviceof abrand-name company.Examples of
franchises would include the thousands of McDonald’s
fast-food restaurants around the world, dealerships for the
automobile companies, and, loosely defined, even a New
YorkCitytaxicabmedallion.Ineachcase,thefranchisee(the
person who buys the franchise) pays the franchisor
(McDonald’sorFord)eitheranup-frontfeeoranannualfee
forrunningthefranchise.Inreturn,heorshegetsthepower
of the brand name, corporate support, and advertising
backing.
Franchise Value and Excess Returns
Theacquisitionofafranchiseprovidesthefranchiseewiththe
opportunitytoearnabove-marketreturnsforthelifeofthe
franchise.While the sourcesof theseabove-marketreturns
vary from caseto case,they can arisefrom a number of
different factors.