Franchise

What is Franchise?

A business arrangement in which one business, the franchisor, sells another business, the franchisee, the right to trade using its brand name, products and business methods, usually in return for an initial fee and a share of revenue. The franchisee owns and runs its own outlet but must follow the franchisor's rules.

This definition is part of the Understanding Business Activity chapter in Cambridge O Level Business Studies.

Concepts related to Franchise

• franchisor
• franchisee
• brand

Examiner tips on Franchise

• Answer from the right side of the arrangement. A franchise question is usually about the franchisee — the person buying in. But the franchisor also gains: rapid expansion financed by other people’s capital, with local owner-managers who are motivated because the outlet is theirs. Check which party the question is asking about.