A franchise is a business relationship in which an owner (the franchisor) licenses others (the franchisees) to operate outlets using business concepts, property, trademarks and tradenames owned by the franchisor. Your local McDonald's is probably operated as a franchise. Franchise relationships are regulated by each state and by the Federal Trade Commission and are often quite complex.

A contract known as a franchise agreement should spell out the details of each particular venture. The franchisor often provides the initial capital for the franchise and, in turn, typically takes in a larger share of future profits. In addition,

A franchisor usually provides:
The franchisee provides:
The franchisor and the franchisee both share in the risks and returns of the business, although each agreement is structured differently. Typically, the franchisee is his or her own boss on a daily basis. The franchisor also has a say in the business. For instance, the franchisor is usually responsible for quality control and for maintaining a uniform image among all franchisees. If the quality is not up to par, the franchisor may direct the franchisee to make changes.

IS A LAWYER NECESSARY? It is highly advisable to consult a lawyer. A franchise agreement is a highly technical business document that can have serious financial consequences. The laws regarding franchising vary from state to state, and you do not want to end up with an invalid agreement or unintended liabilities.