{"id":5553,"date":"2017-01-12T11:10:46","date_gmt":"2017-01-12T16:10:46","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/starting-a-business\/what-is-a-business-franchise.html"},"modified":"2026-05-29T01:54:00","modified_gmt":"2026-05-29T06:54:00","slug":"what-is-a-business-franchise","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/starting-a-business\/what-is-a-business-franchise.html","title":{"rendered":"What Is a Business Franchise?"},"content":{"rendered":"\n
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What Is a Business Franchise?<\/h1>\n\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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A business franchise system is a business model where the owner of a business grants a license to another party to operate the business using their brand name, established trademarks, and operating systems in exchange for franchise fees. The business owner is the franchisor and the licensee is the franchisee.<\/p>\n\n <\/div>\n\n\n\n

Many of us may refer to a store with multiple locations as part of a “chain” or franchise without really understanding the structure of these kinds of businesses. What is a business franchise? How are they formed, and how do they operate? The following article considers some of the aspects of franchises that make them distinct from other kinds of businesses.<\/p>\n

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Who Owns the Business?<\/h2>\n

A business may have multiple locations without being a franchise. If the locations all have the same owner, then the business does not meet the definition of a franchise<\/a>. A business franchise is defined by the structure of its ownership.<\/p>\n

Franchising occurs when the owner of a business grants a license to one or more parties for the purpose of conducting business using the same trademarks<\/a>, trade names<\/span>, trade dress<\/a>, and other identifying aspects of the business. The party granting the license is referred to as the “franchisor<\/span>,” while those purchasing licenses are referred to as the “franchisee.”<\/p>\n

The franchisor<\/span> is frequently involved in specifying the products and services offered by the franchisees. They may also provide a system of operation, marketing tools, raw materials, training, and other forms of support.<\/p>\n

Kinds of Franchising Relationships<\/span><\/h2>\n

There are two basic kinds of franchise relationships<\/span>:<\/p>\n