franchizes

Franchising is a method of distributing goods or services where a company (the franchisor) licenses its brand, operating system, and intellectual property to independent operators (the franchisees) in exchange for fees and royalties. The franchisor provides a proven business model, brand standards, training, marketing, and ongoing support, while the franchisee runs day-to-day operations under the franchisor's guidelines.

A franchise agreement typically outlines upfront payments such as an initial franchise fee, ongoing royalties based on revenue, and contributions to a national or regional marketing fund. It also covers training commitments, quality controls, territorial rights, renewal terms, and exit options. Two common forms exist: business format franchising, in which the franchisee adopts the full system (brand, products, and operating methods) and a high level of control; and product distribution franchising, where the franchisee primarily sells and promotes branded products with less system-wide control.

Franchising offers benefits for franchisors, enabling rapid expansion with reduced capital, and for franchisees, providing an established brand and support. Risks include ongoing costs, dependence on the franchisor for policy changes, and variable performance across locations. Franchise relationships are regulated in many jurisdictions, with disclosure requirements and specific franchise laws varying by country. Typical contracts last several years and may include renewal options, non-compete clauses, and restrictions on where a franchise may operate.

Industries commonly using franchising include food service, hospitality, fitness, automotive services, and personal care. Variation exists in scale and sophistication, from single-unit storefronts to multi-unit or international networks.