Which term describes an arrangement where a franchisor sells rights to others to operate under its name, in exchange for fees and royalties?

• A. Franchise
• B. Merger
• C. Joint Venture
• D. Market Development

Answer: (A)

Franchising is when a franchisor grants the right to use its brand, business model, and ongoing support to another party in exchange for upfront fees and ongoing royalties. This arrangement matches the idea of selling rights to operate under the franchisor’s name while earning revenue from fees and royalties. It enables rapid expansion with the brand’s consistency, while the franchisee bears the day-to-day running of the business. By comparison, a merger combines two firms into one entity, a joint venture creates a separate entity for a specific project or venture, and market development refers to expanding into new markets, not licensing the brand to operate under the same name.