Franchise - GCSE Business Definition

What is a franchise?

In GCSE Business, a franchise is an arrangement where an individual (franchisee) buys the rights to operate a business model, sell its products and use its branding. The franchisee receives support from a larger company (franchisor) in exchange for an initial lump sum plus ongoing fees.

A franchise is not a form of business ownership; it is an alternative to starting up a brand new business from scratch. The franchisee establishes a private limited company and then operates the business using the franchisors’ systems and receives training, marketing support, and ongoing assistance. For the franchisor, franchising is a quick way to grow the business. For the franchisee, operating under a well-known brand name is more likely to lead to success than starting up a business from scratch. Franchises are particularly common in the fast food industry, with well-known brands such as McDonalds, Subway and Dunkin Donuts expanding their businesses through franchising.