Franchising is trading under the trade name of a third party (Franchiser) under a licence granted by the Franchiser. The franchise agreement allows the trader (Franchisee) to distribute the products or perform the services designated by the Franchiser who retains control over the quality and standards of the business and the way it is run.
The franchise agreement usually covers a particular geographical area and a limited period. It is often able to be renewed.
Franchising is a means of taking advantage of the success of an established business. The Franchisee normally pays the Franchiser a fixed licence fee, a share of turnover or profit, recurring fees or a combination of these.
A franchise business can be set up as a sole trader, a partnership or a limited company. Setup requirements and the obligations of the franchise business will depend on whether the business is established as a sole trader, a partnership or a limited company.