Franchising is used for business growth.
Franchising has allowed certain multinational businesses, which are now household names, to expand much more rapidly than they could otherwise have done. McDonald’s and Starbucks being just two great examples of franchising. There are very few countries in the world that do not have a McDonald’s outlet or a Starbucks coffee shop!
Most of these are franchised outlets.
FRANCHISE
So, a franchise is a unique type of business organization in the private sector where the company such as McDonald’s, KFC, Burger King, Starbucks, Subway, Domino’s Pizza, etc. allows other people or businesses the right to sell products using its name, the logo, specific marketing methods and trading systems in return for some form of payment.
A franchise is not strictly a form of legal structure for a business, but it is rather a legal contract between the two firms.
FRANCHISOR
A franchisor is a company that develops a product concept and sells others the rights to make and sell that product. A franchisee is a person who buys a franchise from the franchisor.
FRANCHISEE
The franchisee can separately decide which form of legal structure to adopt, whether to operate as a sole trader, partnership or as an incorporated business organization. These franchisees are then being constantly monitored to ensure that the same standards are maintained around the world.
All in all, franchising is a popular way for multinational businesses to expand rapidly across many countries.
