A franchise is a kind of agreement between a company with an established brand and a smaller retailer or business. This allows the latter to make use of the brand and sell the former’s products or services. One of the items included in a franchise contract is the location where the products or services will be offered. The corporation may choose to implement conditions regarding the territory over which the retailer will have exclusive rights to the sale. This is beneficial to both parties because it ensures that the retailer is able to maximize the market in the area where the store is based. At the same time, the success of the small business makes it easier for the corporation to prove that its franchises are profitable, thus making it easier for more franchises to be sold.
The corporation also has the right to set other conditions aside from the store location. It may choose to implement certain guidelines on promotions and the use of the brand name and logo. While the retailer may be allowed to make decisions on advertising, the corporation can also decide to launch more uniform advertising campaigns for implementation by all franchisees. This ensures that the brand is able to maintain its own standard.
Some businesspeople may find franchising to be a favorable business model, simply because the brand is usually established already. This means that promoting the products or services will not be as difficult and costly as building up a completely new brand, and this translates into greater potential for revenue.