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 ?
Hood: Franchisors should analyze or benchmark the practices of franchise systems in similar industries.
While franchisors are permitted to follow the 1978 version of The Rule until June 30, 2008, they may also begin to follow the revised Rule immediately, and many have chosen to do so.
Unfortunately, many franchisors overlook both the challenges and the opportunities that exist for managing what is perhaps their most important asset--their people and, more particularly, their franchisees.
All legitimate franchisors should have these available.
Franchisors should disclose material facts in accurate and unambiguous language and avoid archaic and awkward legalese.
Mr John Pratt, head of franchising at Birmingham law firm Pinsent Curtis, said the increasing trend for franchises to seek redress from the courts against franchisors when their businesses fail should sound a loud warning.
i) in which goods or services are sold or offered for sale or are distributed under a marketing or business plan prescribed in substantial part by the franchisor or its associate;
The UFOC/FDD contains 23 items of information that must be current as of the completion of the franchisors most recent fiscal year.
It is the consensus of many large franchisors that African Americans with strong business backgrounds tend to do well as franchise owners.
Franchisors should not assume, however, that self-regulation permits the industry to write its own rules or impose its perceptions as the norm.
In the course of preparing to defend against the suit, Marks discovered apparent violations of Federal Trade Commission guidelines and New Jersey franchise regulations by the two franchisors.