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A franchise is way for companies to expand their business by licensing the rights to third-party retailers or individuals -- or franchisees -- who then can use the franchise’s logo, name and business model.
There are three different kinds of franchises. They include:
Distributorships, such as with Toyota, which licenses the right for a third party to sell the parent company product.
Trademark licensing, which allows companies to buy the right to use the parent company’s trademark along with their own brand, such as what Coca-Cola licenses to other companies.
Business format franchises, such as Subway, which offer its franchisees the right to sell its goods and/or services using its business model.
Popular franchises: Some examples of popular and well-known franchise models are in the food industry -- many which have gone international -- such as McDonald’s, Subway and Dominos. Starbucks, which is commonly thought to be a franchise, is not.
For more information about top franchise businesses, check out Entrepreneur's "2015 Franchise 500 Rankings," or get the Entrepreneur Franchise 500.
