How Does a Franchise Business Work?

We all are familiar with – McDonald’s, Domino’s Pizza, H & R Block, Baskin-Robbins, etc. These are all franchise businesses grown over the few years in various parts of the world – but how do they actually work? Franchising is a legal term most commonly referred to as a business relationship in which one company authorizes an individual or group, business or other entity to carry out specific commercial activities.


The origin of franchising can be traced back to the middle ages, but it is generally recognized that the early 20th century saw the first real Business Format Franchise. This was developed by the Singer Sewing Machine Company in the United States, which set up a service and maintenance system for its machines. General Motors was also involved in franchising later in the 20th century, laying the foundations for a franchised motor dealership network, a system that still pre-dominates motor vehicle retailing to this day.


In this article, we look at how the franchise business works in India.

Franchising is the running of a business using some or all aspects of another successful business in partnership. In the past, businesses would provide the right to sell a product in a particular market known as distribution deals or distributorship. More recently, however, the concept of franchising has evolved wherein a business allows or grants another individual or group or business the license to operate under the same name and use the expertise of the parent company for establishing a successful business.


Opening a franchise is an immensely rewarding approach to business. Under the most common franchising models, small business owners are able to benefit from the reputation, business structure, established product or services, intellectual property and customer base of a large corporation without assuming the complexities of running the larger corporation itself.

The franchisor is the parent business or head business that allows branch franchisees to operate using the same products or services, trademarks, techniques, etc. in return for an agreed-upon fee which is a type of investment. A franchisor usually has a number of franchisees but a franchisee can have only one franchisor. The relationship between the franchisor and franchisee is governed by the franchise agreement.

This agreement involves details about the franchisor and franchisee, location and maintenance of the franchise, trademarks of the franchise, standards of operation, license fee if any, obligations and considerations of granting the franchise, terms, and conditions of the agreement, termination, and renewal of the agreement, etc.

The present-time business world is evolving at a much faster rate than it was expected. As more and more brands are stepping in and opening up new avenues, the opportunity to be a part of franchising is also increasing. Growth has become a significant meaning of Franchising and the future with it looks promising. To know more info call us now +91 8287 135135 today.