Franchise

AAA

DEFINITION of 'Franchise'

A type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees.

INVESTOPEDIA EXPLAINS 'Franchise'

Franchises are a very popular method for people to start a business, especially for those who wish to operate in a highly competitive industry like the fast-food industry. One of the biggest advantages of purchasing a franchise is that you have access to an established company's brand name; meaning that you do not need to spend further resources to get your name and product out to customers.

RELATED TERMS
  1. Business Starts Index

    A compilation of statistics published by Dun & Bradstreet ...
  2. Licensing Agreement

    This term refers to a written agreement entered into by the contractual ...
  3. Franchise Factor

    The measurement of the impact on a company's price-earnings (P/E) ...
  4. Industry

    A classification that refers to a group of companies that are ...
  5. Trademark

    A symbol, word, phrase, logo, or combination of these that legally ...
  6. Business

    1. An organization or enterprising entity engaged in commercial, ...
RELATED FAQS
  1. What are some examples of different types of business models in major industries?

    As an important aspect of a comprehensive business strategy, a company's business model is a representation of its core business ... Read Full Answer >>
  2. Why did Howard Schultz decide to keep Starbucks a chain rather than allow franchising?

    Starbucks does, in fact, franchise on a limited basis. Starbucks CEO Howard Schultz long resisted franchising in the United ... Read Full Answer >>
  3. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  4. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  5. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  6. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  3. Entrepreneurship

    Is Buying A Franchise Wise?

    If you like being your own boss, this is not the job for you.
  4. Entrepreneurship

    CEOs Who Blazed The Trail (Kroc, Hock And Welch)

    The right CEO can make all the difference in a company's market position.
  5. Personal Finance

    Share The Wealth With Franchises

    Skip the first step and build off of someone else's successful business model.
  6. Economics

    Understanding Organizational Behavior

    Organizational behavior is the study of how humans interact in group environments.
  7. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  8. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  9. Economics

    What Does Capital Intensive Mean?

    Capital intensive refers to a business or industry that requires a substantial amount of money or financial resources to engage in its specific business.
  10. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!