What is a franchise?

A franchise refers to a business model in which an individual or a company (the franchisee) is granted the rights to operate a business under the established brand of another (the franchisor). This arrangement allows the franchisee to sell products or services using the franchisor's trademark, business methods, and support systems. It often includes training, marketing assistance, and operational guidelines to ensure consistency across various locations.

This structure benefits both parties: the franchisee gains the advantage of starting a business with a recognized brand, reducing the risks associated with launching a new venture independently; while the franchisor expands its market reach without the need to invest directly in each individual operation. The franchisee pays fees or royalties to the franchisor in exchange for these privileges, which helps the franchisor maintain brand quality and support its franchise network.

Understanding this definition is crucial for recognizing how franchises function in the broader context of business, distinguishing them from other business arrangements like partnerships or cooperative agreements, which do not involve the same level of brand association and support.