A franchise is a business model where you (the franchisee) gain the right to operate a business using that company's brand, systems, and support for a fixed amount of time. That company is called the franchisor.
Unlike starting up your own business, you're not starting from scratch. Instead, you're signing up for a proven system. The franchisor has already worked out the pitfalls and has created methods to avoid them. Brands like The UPS Store, Boston Pizza, Mary Brown's and Chairman's Brands are examples of long term franchisors.
You must follow their training and playbook to the letter - their branding, suppliers, marketing strategies, and their software. In return, you avoid many of the new-business speedbumps by starting your business from much further along the learning curve. Most franchise agreements are 5-20 years and many offer renewal options.
You pay:
- An upfront franchise fee
- Ongoing royalties and advertising fund (a percentage of your revenue)
- Investment - costs of set-up, equipment, location, etc.
You get most or all of:
- Training
- Ongoing Support
- Operational Manuals
- Brand recognition
- A territory or region to operate in
- Operational software and head-office support team
- Help with securing a location/site development
- Marketing programs
- Purchasing power through established suppliers
So, you own your own company and run the day-to-day business, but you are not on your own. In exchange for following their rules and best practices, you will have guidance and support for any challenges that come up, and therefore a better chance of success.