franchise

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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.

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.

franchise

the granting by one company to another company (exclusive franchise) or a number of companies (non-exclusive franchise) of the right/s to supply its products. A franchise is a contractual arrangement which is entered into for a specified period of time, with the franchisee paying a royalty to the franchisor for the rights assigned. Examples of franchises include the McDonald Burger and Kentucky Fried Chicken diner chains, Tie Rack and Dyno-Rod.

Franchises are a form of co-partnership, offering mutual benefits. They allow the franchisor to expand sales rapidly and widely, sometimes on a global basis, without having to raise large amounts of capital, by building on the efforts of a highly motivated team of entrepreneurs. Individual franchisees are usually required to contribute the bulk of the investment in physical assets and hence have a personal interest in the success of the venture. For his part, the franchisee obtains access to an innovative product or novel selling method, with the franchisor providing back-up, technical assistance, specialized equipment and advertising and promotion. See VERTICAL MARKETING SYSTEM, BUSINESS STRATEGY, EXTERNAL GROWTH, BUSINESS FORMAT FRANCHISING.

franchise

the assignment by one FIRM to another firm (exclusive franchise) or others (nonexclusive franchise) of the right(s) to supply its product. A franchise is a contractual arrangement (see CONTRACT) that is entered into for a specified period of time, with the franchisee paying a ROYALTY to the franchisor for the rights assigned. Examples of franchises include the Kentucky Fried Chicken and MacDonald's burger diner and ‘take-away’ chains. Individual franchisees are usually required to put up a large capital stake, with the franchisor providing back-up technical assistance, specialized equipment and advertising and promotion. Franchises allow the franchisor to develop business without having to raise large amounts of capital.

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.

References in periodicals archive ?
Spears and Williams, both former Blimpie franchise owners, invested $250,000 from personal savings, proceeds from the sale of their Blimpie properties, and a home equity loan to turn an old Chinese restaurant into the first Nemos Seafood.
Los Angeles city officials have allowed cable television companies to get away with providing consumers poor quality service with out-of-date technology even as they fell years behind in their franchise fee payments, an audit by Controller Laura Chick reported Thursday.
The advantage of franchises, whether exclusive or non-exclusive, is that the local governing authority is able to set minimum standards and environmental service requirements, Skinner adds.
franchises require investments averaging $100,000, yet many major Mexican opportunities, for instance, cost half that amount.
Despite the fact that Walter owns a franchise unit under one of the most successful companies in America, he is continually on the verge of failure.
For the third consecutive year, global real estate franchisor, RE/MAX International ranks highest among real estate franchise organizations - at number 19 in the Entrepreneur 22nd Annual Franchise 500 [R].
The basic philosophy of McDonald' was that by charging less than market value for new franchises, (1) a long-term relationship with franchisees would be established (rather than focusing on short-term profits), (2) new franchises could maximize their prosperity by avoiding becoming saddled with debt and (3) the number of franchise applicants would remain high.
Edwards was named director, franchise recruiting, Southwest; Michael Vogel is director, franchise recruiting, Midwest; and Michael Wootton is director of franchise recruiting, East.
Today, Sells, a past chairman of the WFC, heads up a department that handles lead generation for new franchises, marketing campaigns and maintenance of the corporation's franchising Web site.
Sauma is among the growing ranks of Venezuelan entrepreneurs seeking franchises or turning their own ventures into successful chains.
By all means read the Entrepreneur Magazine Online article about the franchise that tops their 18th annual Franchise 500 list.
CHILLICOTHE, Ohio -- Petland is moving up among top-ranked franchises in the United States and globally.