Franchising is a system for expanding a business and distributing goods and services – and an opportunity to operate a business under a recognized brand name. For example, KKP, a division of Kwik Kopy Printing doesn’t franchise spa services, and Hand & Stone Massage and Facial Services doesn’t franchise printing/design services; they franchise business systems that deliver printing/design services and spa services to customers with consistency – of the products, the services, and the customer experience.
A franchise occurs when a business (the franchise) licenses its trade name (the brand, such as KKP or Hand & Stone) and its operating methods (its system of doing business) to a person or group (the franchisee) who agrees to operate according to the terms of a contract (the franchise agreement). The franchisor provides the franchisee with support and, in some cases, exercises some control over the way the franchisee operates under the brand.
In exchange, the franchisee usually pays the franchisor an initial fee (called a franchisee fee) and a continuing fee (known as a royalty) for the use of the trade name and operating methods.
Franchised businesses employ well over a million Canadians and account for up to 12% of the country’s gross national product – 50% more than in the United States.