What is a franchise?

A franchise is where one person (the Franchisor) licences to another the right to run their business using the franchisor's brand and systems over a limited period of time. In return for this the franchisee will usually pay the franchisor an initial fee for the purchase of the franchise and an ongoing fee or royalty for the use of the franchisor's brand and systems and for the support provided by the franchisor for a certain period of time. The franchisor and the franchisee enter into a franchise agreement which sets out each party's rights and obligations and the franchisee is required to operate their business according to rules set out in the franchise agreement and in operational manuals developed by the franchisor.