Which of the following best describes a business format franchise?
A)It is a broad franchise agreement in which a franchisee pays for the right to use the name, trademark, and production methods of a franchisor.
B)It is a type of franchising arrangement in which a franchisor makes a product and licenses a franchisee to sell it.
C)It is a type of franchising arrangement in which a franchisor shares ownership with a franchisee by selling a number of its shares.
D)It is a broad franchising agreement in which a franchisee pays a franchisor for the right to use the production methods of the franchisor and functions under a different name and identity.

Question

Quizplus · Accepted Answer

In a business format franchise, the franchisee pays for the right to use the name, trademark, and production methods of the franchisor. This allows the franchisee to operate under the branding and operational guidelines of the franchisor, but with some degree of independence in terms of day-to-day decision-making. This is in contrast to a product distribution franchise (B), which involves a franchisor licensing a franchisee to sell a specific product or line of products, and a share ownership franchise (C), which involves a franchisor and franchisee sharing ownership in the business. Option D describes a hybrid model that does not fit the category of a "broad franchising agreement," which makes option A the best choice.

Which of the Following Best Describes a Business Format Franchise