What defines a franchise in business terms?

A franchise in business terms is defined as a contract between an individual or group (the franchisee) and a company (the franchisor) that allows the franchisee to sell the franchisor's products or services within a specific territory. This arrangement enables the franchisee to operate a business using the established brand, operational model, and support systems provided by the franchisor. Franchising is advantageous for both parties; the franchisor expands its reach and customer base, while the franchisee benefits from the reputation and proven business model of the franchisor.

In essence, this structured relationship is what sets franchising apart from other business models, such as sole proprietorships or cooperatives. It emphasizes the legal and commercial obligations established in the franchise agreement, which governs the operation of the franchisee's business.