Final answer:
A franchise is an organization that pays to use another business's brand, products, and processes. It's different from partnerships, mergers, or acquisitions, as it involves a relationship where the franchisee operates under the franchisor's established model with ongoing support.
Step-by-step explanation:
An organization that gets the right to use another organization's brand name, products, and processes is referred to as a franchise. A franchise operates under the franchisor's business model and in return, the franchisee pays initial start-up and annual licensing fees. Franchises can be seen in various sectors, particularly in fast-food chains like McDonald's, which were among the first to adopt the franchise model.
Distinct from a partnership, where two or more individuals share ownership and responsibility of a business, a franchise allows for the use of a brand's trademark, support, and system by an independent owner. Unlike a merger or an acquisition, where two companies become one, a franchise agreement maintains the separateness of the entities with a shared interest in the brand's success.
Franchising is a growth strategy for businesses and provides an opportunity for franchisees to manage a business with an established reputation, reducing the risks that come with starting an independent company. The franchisee benefits from the franchisor's trademarks, established brand recognition, and proven business model, thus providing a path for both business expansion and individual entrepreneurship.