What Is a Franchise?

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By Joel Libava
From Bplans

A franchise is a type of business that is owned and operated by an individual (franchisee) but that is branded and overseen by a much larger—usually national or multinational—company (the franchisor). Many of the stores and restaurants that you see every day are franchises: Subway, 7-11, The UPS Store, Ace Hardware, Pizza Hut, Hilton Hotels, Molly Maid, and thousands more.

When you buy the rights to open this type of business, you’re buying the rights to use a proven business model and system, with proven prices, products, and marketing techniques. You’re also buying the rights to a brand: You get full access to the company’s trademarked materials including logos, slogans, and signage—anything that has to do with the brand...

In addition, you may be given an exclusive geographical territory to cover. Information about territory is always spelled out in your franchise agreement, as is the time period for which you own your franchise business. Typically, this sort of contract lasts between 5 to 10 years in length and you usually have the right to renew them.

From the FTC: A Consumer's Guide to Buying a Franchise

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