What is franchising?

Definition of franchising

Franchising is a way of growing a business, particularly in diverse locations, without needing to recruit additional employees. A franchise is created by a franchisor, who allows individuals (known as franchisees) to buy the right to use the business’s name, logo, and methods of operation.

The franchisee usually also has to pay the franchisor an annual fee, which may be fixed or it may be a percentage of their franchise’s sales or profit.

Each franchisee typically operates in a different geographical location, to avoid competition between different franchisees.

Example of franchising:

McDonald’s is a good example of a franchise business. In the UK 65% of their restaurants are franchised and 35% are company-owned.