Franchising
Corporation Tax
Guidance
There is no universal definition of 'franchising', but typically, franchise is the grant of a licence to carry on a copycat business by a larger business operation (the franchisor) to a purchaser (the franchisee) in return for an upfront fee. Further ongoing fees are payable under the agreement, often as a percentage of turnover. The licence enables the franchisee to benefit from a range of items that might be on offer from the franchisor, such as the following:
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use of the brand name and company logos
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use of the marketing strategy
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the ability to purchase stock
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access to suppliers and possibly financing
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IT and sales support
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the provision of training
The benefit of operating a business in this way is that the franchisor benefits from an up-front and ongoing stream of fee income, whilst the franchisee generates profits without having to incur the time and expense of establishing a new brand and business model. A number of fast food restaurants operate using the franchise model, for example.
A useful source of background
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