Franchising

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Description of Franchising. Explanation.

Definition Franchising. Description.

Franchising is a business model wherein the franchisor (owner) of a product, service, or method grants the franchisee (dealer) the right to (exclusively) use the franchiser's brand name, reputation, and business skills in certain defined geographical locations or market areas. Usually, the franchisee also has to agree with specific rules, a business model and certain values. On top of that the franchisee has to pay franchising fees (both one-time and annual royalties) to the franchisor. The model combines:

• the entrepreneurial skills, local market knowledge, and business experience of the franchisor, with

• the goodwill of the brand and know-how / assistance in organizing, training, merchandising, marketing, and managing of the franchiser.

A well known and successful example is McDonalds.

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Compare with: Business Models  |  Strategic Alliance

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