What is franchising?

Definition of franchising

Franchising is a way of growing a business, particularly in diverse locations, without needing to recruit additional employees. A franchise is created by a franchisor, who allows individuals (known as franchisees) to buy the right to use the business’s name, logo, and methods of operation.

The franchisee usually also has to pay the franchisor an annual fee, which may be fixed or it may be a percentage of their franchise’s sales or profit.

Each franchisee typically operates in a different geographical location, to avoid competition between different franchisees.

Example of franchising:

McDonald’s is a good example of a franchise business. In the UK 65% of their restaurants are franchised and 35% are company-owned.

Business tips and news

If you check this box we'll include information and updates about Making Tax Digital along with your general business tips and news.

We’ll never share your details with third parties for their marketing purposes. For details on how we use customer information, see our General Privacy Notice. You can opt out of marketing emails any time by clicking on the unsubscribe link in the footer of any email.

Are you an accountant or bookkeeper?

Find out more about FreeAgent for your practice.