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GCSE Business · key term
A business that grants others the right to trade using its brand and business format.
Used by AQA and Edexcel
Paper 1, Paper 2
Revise: Methods of Business ExpansionIn franchising, the franchisor grants a franchisee the right to trade using its brand and business format. The franchisee pays an initial fee and ongoing payments, often royalties based on sales revenue. In return, it usually receives support such as training and marketing assistance.
Specification 1.4.1 · Paper 1
The business that grants permission to use its brand and business system in a franchise arrangement.
For franchising, identify whose interests you are discussing. A benefit to the franchisor is not necessarily a benefit to the franchisee.
Keep franchisor and franchisee distinct. Franchising is a way of operating a business, not a separate legal ownership structure.
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A franchise allows a franchisee to operate using a franchisor’s name, products and business system. Food businesses such as Subway and Domino’s use franchise arrangements. The franchisee runs their own operation under the agreed system rather than inventing an entirely new brand.