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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?

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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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HomeTeam Inspection Service

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Strategic Partnerships Fuel Franchise Growth at HomeTeam Inspection Service

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Express Employment Professionals

What’s in the 2025 FDD? A Closer Look for Express Employment Professionals Franchise Buyers

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petbar

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How petbar Makes Pets and Their Owners Happy as Part of the Family in a Clean and Fun Environment

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petbar Franchisees Win the $6.89B Global Market With Complete Transparency, Self-Service and Membership Models, Creating the Happiest Place for Dogs

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Why petbar Wants to Be the “Disney World for Dogs” — and a Dream Business for Franchisees

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Chick-fil-A Tops Customer Satisfaction Rankings for 11th Year as Challenger Brands Gain Ground

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Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores

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Top 10 Low-Cost Home-Based or Mobile Franchises for 2025

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How Does Franchising Work?

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