Franchise

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FRANCHISE (business)

In business, the right given by one company to another to manufacture, distribute, or provide its branded products. It is usual for the franchisor to impose minimum quality conditions on its franchisees to make sure that customers receive a fair deal from the franchisee and ensure that the brand image is maintained.

The franchisor is also often responsible for advertising and product development. It may insist on franchisees buying raw materials from it alone. The franchisee has to pay a levy, usually a percentage of either profit or turnover, to the franchisor.

Examples of franchise operations in the US include fast-food restaurants, auto-repair shops, and specialty stores, where the owner/managers have purchased the right to operate a brand-name business using materials supplied by the manufacturer for a percentage of the profits.

Copyright © 1995 Helicon Publishing Ltd

noun liberty; a privilege or exemption by prescription or grant; the right to vote, especially for a representative in a national government; voting qualification; a commercial concession by which a retailer is granted by a company the generally exclusive right of retailing its goods or providing its services in a specified area, with use of the company's expertise, marketing, trademark, etc; a similar concession granted by a public authority to a broadcasting company; a percentage below which the underwriter incurs no responsibility