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Franchising

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance

Franchising

Produced by a Tolley Corporation Tax expert
Corporation Tax
Guidance
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There is no universal definition of 'franchising', but typically, franchise is the grant of a licence to carry on a copycat business by a larger business operation (the franchisor) to a purchaser (the franchisee) in return for an upfront fee. Further ongoing fees are payable under the agreement, often as a percentage of turnover. The licence enables the franchisee to benefit from a range of items that might be on offer from the franchisor, such as the following:

  1. •

    use of the brand name and company logos

  2. •

    use of the marketing strategy

  3. •

    the ability to purchase stock

  4. •

    access to suppliers and possibly financing

  5. •

    IT and sales support

  6. •

    the provision of training

The benefit of operating a business in this way is that the franchisor benefits from an up-front and ongoing stream of fee income, whilst the franchisee generates profits without having to incur the time and expense of establishing a new brand and business model. A number of fast food restaurants operate using the franchise model, for example.

A useful source of background

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