Franchise Contract Research, Based On The Coordination Theory Of Supply Chain Contract Garment Industry

A supply chain is made up of two or more entities with different objectives. The entities are primarily concerned with optimizing their own benefits, which often results in a poor performance for the whole supply chain. Developing strategies to decrease the risk faced by the retailer is becoming critical in supply chain. Among the solutions, supply chain contracts, which have draw much attention of the researchers recently, are used to provide some incentives to adjust the relationship of partners to coordinate the supply chain,so that, the total profit of the decentralized supply chain reaches what can be achieved under a centralized decision.In a garment franchising system, the stipulating of a franchise contract is the most important element. Generally, a franchise contract includes franchise initial fee, royalty fee, caution money, advertising fund, wholesale price, and so on. In a garment franchising system, there are several contracts such as "initial fee plus a fixed amount of money as royalty fee", "initial fee plus a proportion of sales revenue as royalty fee", "initial fee plus a proportion of profit as royalty fee". The focus of this paper is to analyze the rationality and efficiency of these forms of contracts on the basis theory of supply chain contract, and to put forward a contract combining of return contract and a proportion of revenue as royalty fee.Firstly, the paper analyzes the conditions to coordinate supply chain using different contracts on the assumption that the retail price is fixed. Secondly, the paper analyzes the contracts in a garment franchising system, and gets the condition for supply chain coordination and the mechanism how to allocate the profits between franchisor and franchisee and how to control the wholesale price. Furthermore, the paper analyzes different contracts under the condition that the retail price can affect the market demand and gets some results, which can be provided reference to the maker of garment franchising contract.