What is a franchise?

A franchise is best defined as a business model where a business owner grants rights to operate using the parent company's brand. This means that an individual or entity (the franchisee) purchases the right to use the brand, trademarks, and operational systems of an established company (the franchisor) in exchange for a fee or percentage of sales.

This arrangement allows the franchisee to build their business based on a proven concept and brand recognition, while the franchisor benefits from expanded market presence without bearing the direct costs of running each location. The relationship typically involves support from the franchisor in areas such as marketing, training, and supply chain management, making this model attractive for both parties.

The other options do not accurately describe a franchise. A corporate merger represents a completely different business strategy aimed at combining two companies, while a government contract involves procurement processes distinct from franchising. Lastly, a sole proprietorship refers to an ownership structure where one individual owns and operates the business independently, unlike the franchise model which involves a relationship between two different legal entities.