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What is a Franchise?


Hey, I’m Doug Jackson, founding attorney of The Law Firm of Douglas G. Jackson. Today, I want to talk to you about franchises. What is a franchise? A franchise is a business model in which a franchisor licenses their brand, trademarks, and processes to a franchisee. The franchisee then agrees to open a new location following the franchisor’s guidelines. Many of the places you shop are likely franchises and you don’t even know it. McDonald’s for example, are usually not owned by the corporation itself, but by an independent franchisee. The McDonald’s franchise owner gets the benefit of using the McDonald’s brand name, business plan, and suppliers, but also gets to be an owner of his or her own business. The McDonald’s corporation likes this because it isn’t responsible for any losses of the franchisee, but the franchisee is obligated to pay McDonald’s part of its revenues or profits as royalties. As a business who is expanding a business, becoming a franchisor could be a great way to grow your business without much investment. Instead, the franchisees make the investment on your behalf. While you give up some control, you still get to create a Franchise Agreement, which will lay out all of the rules for the franchisee. On the other hand, if you really want to start a business, but you don’t know what to do, looking at becoming a franchisee might be a great plan for you. You get many of the freedoms of a business owner, subject to the Franchise Agreement, but you get to build an already proven product and use an already proven playbook. Of course, creating a franchise, becoming a franchisee, or operating the franchise as a franchisor is much more complicated than what we’ve discussed today. Down the road, we’ll explore the nuances much more. However, for now, at least you have a little better understanding about what even is a franchise.


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