When you hear the word "Franchise" you probably think of fast food restaurants like McDonald's, Burger King and Wendy's. But there are many more types of franchise businesses.
One out of every three dollars spent by Americans for goods and services are spent in a franchised business.
Franchising is a method of doing business. It is a method of marketing a product and/or service, which has been adopted and used in a wide variety of industries and business. The word "Franchise" literally means to be free. In this sense, franchising offers people the freedom to own, manage and direct their own business. However, as with any freedom, there are responsibilities. In franchising, these responsibilities have to do with the franchisee's commitments and obligations --- usually spelled out in a franchise agreement or contract --- to the franchisor. The franchisor is the one who owns the right to the name or trademark of the business. The franchisee is the one who purchased the right to use the trademark and system of business.
Business format franchises offer the franchisee not only a trademark and logo but also a complete system of doing business. Indeed, the word "system" is the key concept to franchising. A franchisee receives assistance with site selection of the business, personnel training, business set-up, advertising, and product supply. For these services the franchisee pays an up-front franchise fee and on-going royalty which enables the franchisor to provide training, research and development and support for the entire business. In a nutshell, the franchisee purchases someone else's expertise, experience and method of doing business.
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