Franchising buy-back contracts arrangement under demand uncertainty

摘要

Aimed at no returns and full returns policies made by franchisors under demand uncertainty in franchising, this paper analyzes the selection of wholesale price, sale price, order quantity and the initial fee under the two policies. The results show that under no returns strategy, the franchisee sets prices to clear all the order quantity at high demand and maximize his revenue at low demand, respectively, But under full returns strategy, regardless of the order quantity, franchisee establishes the sale price to meet the profit maximization whether the demand is high or low. Under no returns policy, when the random fluctuations in demand is larger, that is, the difference between high demand and low demand is larger, the franchisee's optimal order quantity will be greater than sale quantity to meet the maximize revenue; but under full returns strategy, the franchisee's optimal order quantity is to meet the high demand. The franchisor's initial fee is set to guarantee the franchisee's reserved profit.