A franchise is a type of business that is owned and operated by an individual (franchisee) but that is branded and overseen by a much larger company (the franchisor) . The franchisor establishes the brands trademark or trade name and a business system, and the franchisee buys the right to sell the franchisors goods or services under an existing business model and trademark. The franchisee pays a fee to the franchisor for the right to operate a branded outlet of a retail chain. The franchisor provides the franchisee with support and exercises certain controls, such as marketing and operational support.
Franchising is a method of distributing products or services involving a franchisor, who establishes the brands trademark or trade name and a business system, and a franchisee, who operates the business. The word franchise is of Anglo-French derivation—from franc, meaning free—and is used both as a noun and as a verb. A franchise is a temporary business investment involving renting or leasing an opportunity, not the purchase of a business for the purpose of ownership.
Franchises are a popular way for entrepreneurs to start a business, especially when entering a highly competitive industry such as fast food. Offering franchises allows the founder to reduce some of their own financial risk as they look to expand a business to multiple new locations. The franchisor still has to invest their money to create the business model and provide support to the franchisee.
