franchise

franchise

1. An agreement between a firm and another party in which the firm provides the other party with the right to use the firm's name and to sell or rent its products. Selling franchise rights is a method of expanding a business quickly with a minimum of capital. See also franchisee, franchisor.

2. A right granted to another party by a government to engage in certain types of business. For example, a firm may obtain a government franchise to supply certain public services within a limited geographic region.

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Franchise

An agreement in which an entrepreneur buys a license to use another business' products, brand, proprietary knowledge, and trade secrets. This allows the entrepreneur to start a business without building up his/her own brand or products. This is a common way to start a business, especially in highly competitive industries. An industry that utilizes franchises on a regular basis is fast food; because of stiff competition, it is generally more profitable for one who wishes to start a fast food restaurant to buy a franchise.

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franchise

(1) A contractual relationship whereby one party (franchisee) is entitled to use the trade name, image, procedures, and trade secrets of another (franchisor) usually in return for paying an initial purchase price and a percentage of gross revenues over the period of the arrangement. In most instances,there is a separate fee for the franchisee's share of national and regional advertising campaigns. Real estate franchises include Century 21, RE/MAX, and ERA. (2) A government grant of some privilege, such as the ability to operate as a corporation or the ability to sell drinks and sandwiches in the county courthouse.