Franchise

A business arrangement where one party (franchisor) grants another party (franchisee) the right to use its business model, brand, and operating systems in exchange for fees and ongoing royalties. Franchising combines independent ownership with standardized business practices and brand recognition.

For example, a fast-food franchise operator pays $250,000 initial franchise fee plus 6% of monthly revenues to use the franchisor's brand, recipes, and operating systems. The franchisee benefits from established brand recognition and proven business methods while maintaining operational independence within the franchise agreement's parameters.

Managing franchise relationships requires understanding complex agreements, maintaining operational standards, and meeting financial obligations. Organizations must balance brand consistency with local market needs.