A franchise agreement grants a franchisee the right to run a business using the franchisor's brand name, business model and operating systems, usually in exchange for an upfront fee and ongoing royalties.
What it means
The franchisor typically provides training, marketing support and standardised systems, while the franchisee operates the day-to-day business, often within a defined territory and subject to strict brand and operational standards.
Where it fits in
Franchised businesses still need their own business licences and registrations, and run their own payroll for staff they employ - the franchise agreement governs the brand relationship, not the franchisee's own statutory and employment obligations.
Key rules
- Grants the right to trade under the franchisor's brand and systems.
- Usually involves an upfront fee plus ongoing royalties.
- The franchisee runs their own business, staff and payroll separately.
- Often restricted to a defined territory and operating standards.
