Franchising
Franchising is an arrangement whereby a supplier, or franchiser, grants a dealer, or franchisee, the right to sell products in exchange for some type of consideration. It is a business arrange ment involving a contract between a manufacturer or another supplier and a dealer that specifies the methods to be used in marketing a good or service. The franchiser may receive some percentage of total sales in exchange for furnishing equipment, buildings, management know-how, and market research. The franchisee supplies lab or and capital, operates the franchised business and agrees to abide by the provisions of the franchise agreement.
Historically, franchising was a grant by a king to allow a citizen an exclusive right to sell a product or render a service. For this right, the sovereign protected the exclusivity and the subject paid the government an appropriate tribute in service, food, goods, or money. Franchising in the United States started shortly after the Civil War, when the Singer Company began to set up sewing-machine franchises. The concept became increasingly popular after 1900 in the automobile industry. Because of this, other automotive franchises developed for gasoline, oil, and tires. In the 1950s, food operations made a dramatic entrance into franchising with the development of McDonald's, currently one of the world's largest franchise organizations.
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