Franchising Basics

Franchising is a dynamic business arrangement that has become the dominant force in the distribution of goods and services in the United States, as well as many other parts of the world. It has experienced explosive growth since the 1970s and is expected to be the leading method of doing business in the 21st century.

Franchising is a contractual method for marketing and distributing the goods and services of a company (franchisor) through a dedicated network of distributors (franchisees). Under the terms of the contract, a franchisor grants the right and license to franchisees to market a product or service, or both, using the trademark and/or the business system developed by the franchisor.

The franchise relationship imposes obligations on both parties. The franchisor must provide the product, a proven marketing plan or business format, marketing support and training. The franchisee brings financing, management skills, and a determination to own and operates a successful business.