What is a franchise?

In essence, a franchise is where a company obtains a license from another established business. This license allows the company to do business in association with the established company, using its business methods, trademarks and other resources. Typical examples of franchises include fast food restaurants and realtors offices. For example, while there may be multiple realtor offices across the county known as Century 21 realty, the individual offices are generally separately owned and operated, and simply have a franchise agreement with Century 21 (in other words, they are not all part of a chain, like Wal-Mart).

In addition, franchising can also include a situation where a company sells goods which come from the franchisor or offers services controlled by the franchisor, using the franchisor’s trademark. The franchisor generally exercises some control over how the individual franchising business operates itself. Typical examples of this type of franchise include gas stations and car dealerships.

Obviously, there are certain advantages to establishing your business as a franchise, although there are also some disadvantages.