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. Business

    1. An organization or enterprising entity engaged in commercial, ...
  6. Trademark

    A symbol, word, phrase, logo, or combination of these that legally ...
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. Mergers are not the same as acquisitions.
    Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  7. As the number of new employees increases, the marginal product of an additional employee will at some point be less.
    Investing

    More is Less: Diminishing Marginal Returns

    In formal economic terms, the law of diminishing marginal returns states that as the number of new employees increases, the marginal product of an additional employee will at some point be less ...
  8. Typically, SPEs are subsidiaries of a larger corporation.
    Investing

    How Special Purpose Entities Help Fight Risk

    A special purpose entity, sometimes called a special purpose vehicle, is a legal entity created for one very limited, particular task. Typically, SPEs are subsidiaries of a larger corporation.
  9. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
    Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  10. Accounting is the recording of financial transactions of a business or organization.
    Professionals

    What is Accounting?

    Accounting is the recording of financial transactions of a business or organization. It also includes the process of summarizing, analyzing and reporting these transactions in financial statements.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center