Question

Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the United States In return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, what is being done by Royal Chocolatier?

Answer 1

Royal Chocolatier is licensing their product line to American Candy.

Step-by-step explanation:

Licensing agreements are useful because both the licensee (company receiving the license) and licensor (company granting the license) are benefited:

• The licensor benefits since the licensee bears all the costs and risks of the new activity.
• The licensee is able to sell a well established and recognized brand without having to develop the brand themselves.

Licensing results in the licensee bearing the costs and risks.