Franchise

From WikiMD's Wellness Encyclopedia

Franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchise sells goods or services supplied by the franchisor or that meet the franchisor's quality standards.

Types of Franchises[edit | edit source]

There are two types of franchises: Product/trade name franchising and business format franchising.

Product/Trade Name Franchising[edit | edit source]

In product/trade name franchising, the franchisor owns the right to the name or trademark and sells that right to a franchisee. This is usually a simple licensing agreement.

Business Format Franchising[edit | edit source]

In business format franchising, the franchisor and franchisee have an ongoing relationship. This type of franchising is the most common form of franchising.

Advantages of Franchising[edit | edit source]

Franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch.

Disadvantages of Franchising[edit | edit source]

Franchisees often must pay ongoing franchise fees and may have less freedom in business decisions than independent entrepreneurs.

Legal Considerations[edit | edit source]

Franchising is regulated by laws and regulations at the state and federal level. Franchisees are protected by the Franchise Rule enforced by the Federal Trade Commission (FTC).

See Also[edit | edit source]

Franchise Resources

Contributors: Prab R. Tumpati, MD