Franchising [Last Updated by: admin on 2012-01-01]
A system based on the licensing of the right to duplicate a successful business format or industrial process. The franchisor (licensor) permits the franchisee (licensee) to employ its business processes, trademarks, trade secrets and knowhow in a contractually-specified manner for the marketing of goods or services. The franchisor usually supports the operation of the franchisee's business through the provision of advertising, accounting, training, and related services and in many instances also supplies products required by the franchisee for the operation of the franchise. The franchisee, in return, pays certain moneys to the franchisor (in terms of fees and percentage commissions) and agrees to respect contractual provisions dealing, inter alia, with quality of performance. The two principal kinds of franchise contracts are master franchise agreements, under which the franchisor grants another party the right to sub-franchise within a given territory, and direct or unit franchise agreements, which are direct contracts between the franchisor or sub-franchisor and the operator of the franchise unit.