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Definition

Business format franchise

Definition (1):

Business format franchise is a type of franchise that is by far the most popular approach to franchising and is more commonly used by entrepreneurs and entrepreneurial ventures in which the franchisor gives the formula to do business to the franchisee along with advertising, training, and other kinds of assistance. Fast-food restaurants, convenience stores, fitness centers, and tax preparation services are well-known examples of business format franchises.

Definition (2):

“Business format franchising, according to Business Dictionary, is an arrangement where a franchisee receives (in addition to the right to sell goods or services) the franchiser’s designs, quality control and accounting systems, operating procedures, group advertising and promotions, training, and (in case of hotels and travel agencies) worldwide reservation system.” The business format franchise has become the most popular among all forms of franchising.

While a business format franchise provides a franchisee formula for conducting business, it can also be very rigid and demanding. For example, fast-food restaurants such as McDonald’s and Burger King teach their franchisees every detail of how to run their restaurants, from how many seconds to cook French fries to the exact words their employees should use when they greet customers (such as “will this be dining in or carry out?). Business format franchisors obtain the majority of their revenues from their franchisees in the form of royalties and franchise fees.

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