A franchise is an authorisation granted by a company (the franchisor) to an individual or group (the franchisee) to carry out specified commercial activities under the franchisor's brand, systems, and support. The franchisee pays fees and royalties in exchange.

Franchising allows rapid expansion with lower capital risk for the franchisor and provides a proven business model for the franchisee. Examples include McDonald's, Subway, and Marriott. Franchise agreements cover territory, training, marketing, and quality standards.

Key points

• Authorisation to operate under a brand
• Franchisee pays fees and royalties
• Rapid expansion for franchisor
• Proven model for franchisee