Fundamentals of Franchising

"A 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 franchisee sells goods or services supplied by the franchisor or that meet the franchisor's quality standards.

Franchising is based on mutual trust between the franchisor and franchisee. The franchisor provides the business expertise (marketing plans, management guidance, financing assistance, site location, training, etc.) that otherwise would not be available to the franchisee. The franchisees brings to the franchise operation the entrepreneurial spirit and drive necessary to make the franchise a success.
There are primarily two forms of franchising:

-Product/trade name franchising and
-Business format franchising.

In the simplest form, a franchisor owns the right to the name or trademark and sells that right to a franchisee. This is known as 'product/trade name franchising.' The more complex form, 'business format franchising,' involves a broader ongoing relationship between the two parties. Business format franchises often provide a full range of services, including site selection, training, product supply, marketing plans, and even assistance in obtaining financing."

To learn more, visit the SBA's Startup Basics: Buy Franchise.