Franchising is a method of distributing products and services. At least two levels of people are involved in the franchise system:
- (1) the franchisor, who lends his trademark or trade name and a business system; and
- (2) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.
Technically, the contract binding the two parties is the “franchise,” but that term is often used to mean the actual business that the franchisee operates.
Imagine a store owned by an individual with a particular concept. If the business is successful, the owner may develop a second or third store and hire employees for the day-to-day operations.
At that point, if the entrepreneur still wants to expand but prefers not to operate additional stores himself or herself, he or she may decide to “franchise” the store name and business system to an independent business person a franchisee.
In return, the entrepreneur may ask for an initial fee and/ or a continuing royalty payment based on a percentage of that franchisee’s sales.
The business is now franchised.
It’s difficult to tell just by visiting the restaurant. However, if it is a franchise, there should be some signage in the restaurant which indicates that the restaurant is independently owned and operated. Many companies have stores that are operated by franchisees but also have stores that are company owned and operated. So it’s entirely possible that of two stores with the same name, one may be operated by a franchisee and the other operated by the company. In either case, the products, and quality should be the same.