Intellectual property rights (IPR) are based on the uniqueness of a product or service, whether that uniqueness has occurred by way of an invention, the development of a reputation based on a brand name, a novel product design, or the composition of an original work. In general terms inventions are protected by taking out a patent. Brand names are protected by registration of a trademark and designs are protected by registration of that design. On the other hand original compositions are protected automatically in most jurisdictions through what is known as copyright protection.

Owners of intellectual property rights can exploit those rights themselves for profit; they may also allow others to use them for a fee. This latter arrangement is referred to as a licensing arrangement and the fee that exporters extract in exchange for allowing others to use their IPR is commonly referred to as a royalty. A franchising arrangement is a particular form of arrangement that invariably involves licensing of IPR and as such warrants special treatment in this chapter. This discussion includes the common types of franchise arrangement: business format franchising; product or distribution franchising and production franchising; the methods most often used by franchisers to access consumers in overseas countries; and the complex issues that a franchisor must confront when entering into a franchising agreement.