franchise

In business, the right given by one company to another to manufacture, distribute, or provide its branded products. It is usual for the franchisor to impose minimum quality conditions on its franchisees to make sure that customers receive a fair deal from the franchisee and ensure that the brand image is maintained. Famous examples of franchise businesses include McDonald's and the Body Shop.

The franchisor is also often responsible for advertising and product development. It may insist on franchisees buying raw materials from it alone. The franchisee has to pay a levy, usually a percentage of either profit or turnover, to the franchisor.

Examples of franchise operations in the USA include fast-food restaurants, auto-repair shops, and speciality stores, where the owner/managers have purchased the right to operate a brand-name business using materials supplied by the manufacturer for a percentage of the profits.