The licensing contract is only three years, the Bar Maisse is not famous, and the sales is difficult to be estimated, therefore, we suspect if licensing could meet the expectation of rapid growth. The cost of licensing is lower in comparison to joint venture and direct investment, but the royalty is only 5% of gross sales. The growth of CAH might not be significant. Besides, CAH will have no control of operation and reputation if they choose ¡§licensing¡¨ option.
Joint venture might be an unviable choice of CAH because Bar Maisse may not be willing to launch joint venture with CAH. CAH has insufficient information about Bar Maisse, CAH doesn¡¦t know whether Bar Maisse would seek to control the operation or not, that is, CAH will have limited control of operation and reputation. In addition, CAH should share profit with Bar Maisse, and the break-even quantity is 700(see exhibit 3) that is not easy to achieve in the short term because it took CAH six year to expanding sales......
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