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Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchiser licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.
The word “franchise” is of Anglo-French derivation—from franc, meaning free—and is used both as a noun and as a (transitive) verb. For the franchiser, use of a franchise system is an alternative business growth strategy, compared to expansion through corporate-owned outlets or “chain stores“. Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the franchiser’s capital investment and liability risk.
As with any business venture, franchising is not immune to risk. But if undertaken in the right way, franchising can be a vehicle of success for both the franchisor and franchisee.