A Franchise is a business, that uses the name, products, and other services of a larger company. You are the owner of the business, but you pay the Franchiser for the use of its name etc.
Examples: MacDonalds, PizzaHut.
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Franchises are a very popular method for people to start a business.
One of the biggest advantages of purchasing a franchise is that you have access to an established company's brand name; meaning that you do not need to spend further resources to get your name and product out to customers.
Disadvantages include heavy start-up costs as well as ongoing royalty costs. For instance, the estimated total amount of money it costs to start a McDonald’s franchise ranges from $500,000 to $1.6 million.
Franchises, by definition, have ongoing costs to the franchiser company in the form of a percentage of sales or revenue. This percentage can range from 4 – 8%. Other disadvantages include lack of territory control or creativity with your own business, as well as limited financing options from the franchiser.