A franchise is a business with a proven system that a person is looking to buy. A franchise is an established business concept that is sold to other investors and business owners known as franchisees. The franchisor provides operating manuals, operational support, and advertising and marketing assistance.
A franchisee pays a startup fee, a pre-determined fee for advertising costs, and a portion of gross revenues based on a percentage. Certain aspects of the business are handled by the franchisor such as certain quality standards, strategy and marketing promotions. It's important for a franchisee to conduct their business according to the rules of the franchisor. A franchisor has a reputation to maintain and if some franchise operators are not adhering to the franchisor standards, it can reflect poorly on the entire franchise system.