What is Franchising?
Franchising is a method of doing business where the franchisee is provided the right to sell, offer or distribute goods or services under a plan or system that is provided and detailed by the franchisor. Franchising is a strategy for developing and penetrating a market and for achieving a large market share.
What is a Franchisor?
A franchisor is the company that owns and controls the franchise system. The franchisor provides the license to operate the franchise according to a particular method and with the products or services developed by the franchisor.
What is a Franchisee?
A franchisee is the company or person who pays the franchisor for the franchise and the right to use the system.
What is a Franchise?
The franchise is the right granted to an individual or a group to use the trademarks and systems of the franchisor and to promote the products and/or services.
Types of Franchises
The current definition of a franchise emphasizes the continuing relationship between a franchisor and a franchisee. Most franchises can be classified as product or service franchises or business format franchises. Most franchises combine characteristics from both categories.
Product or Service Franchise
Trade Name Franchises
In a “Trade Name” franchise, the franchisor allows the franchisee to distribute goods under the franchisor’s trademark. This type of licensing arrangement includes is found in businesses such as automobile dealers, soft drink bottlers, home entertainment stores and service stations. Typically, early franchises were trade name franchises. In these franchises, the franchisee is generally required to conform to certain standards relating to the
quality but, apart from that, he or she is free to conduct business without any control or guidance from the franchisor.
Business Format Franchises
Business-format franchising is the most common form of franchising today. This form of franchising involves more than just the licensing of a product or service. In these franchises, the franchisor also provides the method for running the business. Most franchises today combine product and business formats.