What does the term “franchise” mean in Business Law?

A franchise is an arrangement established by contract whereby one person, the franchisor, grants a right to another person, the franchisee, to use a distinguishing trade-mark or trade name in connection with the supply of goods and services by the franchisee. The arrangement requires the franchisee to conduct its business in accordance with prescribed operating methods and procedures developed and usually controlled by the franchisor. Generally, an up-front fee is payable by the franchisee upon the initial grant of the franchise. The franchisor has a continuing right to receive compensation from the franchise through fees or lease payments or by its sale of products to the franchisee for resale.


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