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Franchising works by having a company <a href="https://1851franchise.com/tips-for-preparing-your-franchise-system-for-sale-2704626">sell its concept</a> to other entrepreneurs who agree to follow the business model in exchange for <a href="https://1851franchise.com/nick-powills-royalties-are-greater-than-fees-2709235">paying fees and royalties to the franchisor</a>. It is a mutually beneficial strategy — entrepreneurs choose to franchise businesses to raise capital and grow market share, while prospective franchisees choose to invest in a franchise because it provides a path to business ownership that’s significantly de-risked.A company becomes a franchise by filing a <a href="https://1851franchise.com/what-is-an-fdd-2705192">Franchise Disclosure Document</a> and licensing its branding and operational model to other entrepreneurs, who open, own and manage their own locations with the brand.&nbsp;<a href="https://www.mcdonalds.com/us/en-us/about-us/franchising/franchising-faq.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-does-franchising-work-2716469#:~:text=How%20much%20is%20a%20McDonald's,be%20paid%20to%20the%20franchisor." target="_blank" rel="nofollow">McDonald’s</a>, for example, is <a href="https://www.investopedia.com/articles/markets/032015/how-mcdonalds-makes-its-money-mcd.asp?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-does-franchising-work-2716469" target="_blank" rel="nofollow">93% franchisee-run</a> and is one of the world’s largest franchised brands. That means most McDonald’s are owned not by the McDonald’s corporation, but by entrepreneurs — or franchisees — who handle the day-to-day operation of their stores while the larger corporation — or franchisor — provides operational guidance, marketing support, vendor contracts and other resources. McDonald’s has established a brand name, reputation and processes of service that make it <a href="https://1851franchise.com/why-is-mcdonalds-considered-a-real-estate-company-2715077">profitable to own</a> and easier to launch than starting a business from scratch.&nbsp;Chipotle, on the other hand, is a chain restaurant, meaning every single Chipotle location is owned by the Chipotle Mexican Grill corporation, not individual franchisees. Unlike chains, franchised brands have greater flexibility in how they staff their stores and engage with their communities. Usually, a franchised business is owned by a local entrepreneur with ties to their geographic location.If you are interested in franchising with a company in 2021, check out 1851 Franchise’s list of <a href="https://1851franchise.com/what-are-the-best-franchises-to-own-this-year-2715333">the top franchise brands right now</a>.

How Does Franchising Work?

1851 Franchise

Franchising is a process in which an entrepreneur partners with a corporate brand to open a business. The franchisee owns and operates that location using the franchisor's brand name, logo, products, services and other assets.

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United Water Restoration Group

United Water Restoration Group: Maximizing Revenue with Emergency Services 

United Water Restoration Group: Maximizing Revenue with Emergency Services — Be There When Your Community Needs You

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Right at Home

Right at Home 2025 Caregiver of the Year Award

Right at Home Honors Caregivers Worldwide:  Celebrating the 2025 Caregiver of the Year Awards

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Minuteman Press International

Minuteman Press Franchise Owner & President’s Club Member Matt Bloom, Norwich, CT.

Minuteman Press Franchise Review: From Venture Capitalism to Printing

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Paris Baguette

Photo of array of Paris Baguette pastries

Paris Baguette Redefines Morning Routines With Fresh Breakfast and Premium Coffee Strategy

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TruBlue Home Service Ally

TruBlue’s Home Maintenance Plans: Peace of Mind for Homeowners

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Buying a Franchise Masterclass

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Subway Pushes Global Growth Despite U.S. Closures 

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DoorDash Expansion Could Reshape Delivery and Operations for Franchise Brands - 1851 Franchise

DoorDash Expansion Could Reshape Delivery and Operations for Franchise Brands

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Crumbl Franchise Investment - TSG Consumer Partners -  1851 Franchise

TSG Consumer Partners Takes Minority Stake in Crumbl, Signaling Franchise Growth Potential

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Yum Brands Reports Strong Q1 Results with Big Boost from Taco Bell

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QSR: McDonald’s Gains Momentum With Chicken Innovation, Value Deals and Franchisee Support

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Layoffs Surge to Pandemic-Era Highs, Opening Doors for Franchise Growth

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Franchisee spotlight image with Randy and Sandy Craft, Children's Lighthouse logo on blue background

The Crafts’ Successful Journey from New Parents to Children’s Lighthouse Franchisees

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Franchisee spotlight graphic with photo of Amy Lepke and family and Papa Murphy's logo

After 14 Years as a Stay-At-Home Mom, Amy Lepke Returned to Papa Murphy’s — This Time as an Owner

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Franchisee Spotlight with Micki Waters and Papa Murphy's Logo

Work Mom: How Micki Waters Became a Mother Figure to Her Entire Papa Murphy’s Team

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District Taco Franchise Costs, Fees, Profit and Data for 2025

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Franchisee spotlight image with photo of Robert Trujillo and UWRG logo on blue background

How Robert Trujillo Expanded His Construction Business With UWRG

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How Does Franchising Work?

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