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Definition: Franchise

A franchise is a right granted to an individual or group to market a company's already successful goods or services within a certain territory or location operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee. Some examples are McDonald's, Subway, Domino's Pizza etc.

The holding company which holds the brand originally is called the "franchisor." An individual who purchases and runs a franchise from franchisor is called a "franchisee."

Almost in all cases, the franchisee needs to follow certain rules and guidelines already established by the franchisor. Also the franchisee must pay an ongoing franchise royalty fee, as well as an up-front, one-time franchise fee to the franchisor.

Some of the advantages of buying a Franchise are:

  • Corporate image - The corporate image and brand awareness of the company is already established
  • Training - The franchise usually gets extensive training and support from the franchisor
  • Savings in time – One just needs to focus on running a successful business


Hence, this concludes the definition of Franchise along with its overview.


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