[ FREE BUSINESS ] FRANCHISING I

The primary trade association for franchising issues, the International Franchise Association, defines franchising as a "continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising, and management" in exchange for fees and royalties from the franchisee. In other words, franchising is the process of expanding a business whereby a company (franchisor) grants a license to an independent business owner (franchisee) to sell its products or render its services. A franchise, therefore, is a legal agreement permitting a business to furnish a product, name, trademark, or idea to an independent business owner. Each party of a franchise agreement gives up some legal rights to gain others. The franchisor increases its number of outlets and gains additional income. The franchisee opens an established business with strong potential for success. Franchising offers people a chance to own, manage, and direct their own business without having to take all the associated risks. This aspect has allowed many people to open businesses of their own who might never have done so otherwise.

Franchising plays a significant role in the U.S. economy. Franchise sales accounted for about over 50 percent of all retail sales in the United States in the late 1990s and U.S. franchises generated roughly $1 trillion in sales of goods and services annually in the United States during this period, according to the International Franchise Association (IFA). Approximately 1 out of 12, or 600,000, businesses are franchises, which supply jobs for over 8 million people, and there are about 3,000 franchisors in the United States.