In general terms, franchising involves one business (the franchisor) granting a licence to trade using its brand name and business model to another business (the franchisee). The franchisee pays the franchisor an initial licence fee and an ongoing royalty or service fee, and is responsible for financing and managing the franchised outlet. The franchisor plays a continuing role in supporting the franchisee but, in the right situation, can benefit from cost-effective expansion.

Several of the world’s biggest brands have built their business using a franchise model, including 7-Eleven, Subway, McDonalds and Burger King. Well-known brands that offer franchises in the UK include Costa Coffee, Stage Coach Performing Arts, Autosmart and Angela’s Swim School.

According to figures published in 2016 by the British Franchise Association (BFA, www.thebfa.org/external-relations-pr/franchise-industry-research), the UK franchise industry was worth around £15 billion in 2015 (an increase of 46% since 2005) and there were over 44,000 franchisee-owned businesses.

This factsheet explains what franchising is and how it works. It provides information on franchise agreements and how to recruit franchisees.