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...