---
title: "What Is Franchising? How It Works, Explained Video"
description: "Watch how franchising works: the franchisor and franchisee relationship, what a franchisee actually buys, the fees, and what it does not guarantee."
url: "https://www.franchisegrade.com/learn/academy/franchise-basics/what-is-franchising-video"
canonical: "https://www.franchisegrade.com/learn/academy/franchise-basics/what-is-franchising-video"
markdown_url: "https://www.franchisegrade.com/learn/academy/franchise-basics/what-is-franchising-video.md"
type: "Video"
topic: "Franchise Basics"
duration: "4:09"
published: "2026-08-25"
watch_url: "https://www.franchisegrade.com/learn/academy/franchise-basics/what-is-franchising-video"
video_url: "https://www.youtube-nocookie.com/embed/mDS_hTZ-DX0"
---

# What Is Franchising? How It Works, Explained Video

Watch how franchising works: the franchisor and franchisee relationship, what a franchisee actually buys, the fees, and what it does not guarantee.

## Video details

- **Runtime:** 4:09
- **Presented by:** Franchise Grade Research Team
- **Video:** https://www.youtube-nocookie.com/embed/mDS_hTZ-DX0
- **Watch page:** https://www.franchisegrade.com/learn/academy/franchise-basics/what-is-franchising-video

## Key takeaways

- Franchising licenses a proven business system, brand and know-how in exchange for fees and operating conformity.
- The franchisor owns the system; the franchisee owns and operates the individual unit.
- You buy the right to run a model, not a guarantee that it will succeed in your market.
- Initial fees, royalties and advertising contributions are the standing price of the licence.
- Under the FTC Franchise Rule three elements must be present: trademark, significant control or assistance, and a required payment.

## Frequently asked questions

### What is franchising in plain English?

Franchising is a way of growing a business by licensing the right to replicate it. The franchisor supplies the brand, the operating system and the training; the franchisee funds and runs an individual unit. In exchange the franchisee pays an initial fee and ongoing royalties, and agrees to operate the way the franchisor requires.

### What is the difference between a franchisor and a franchisee?

The franchisor owns the trademark and the operating system and licenses it out. The franchisee buys the right to use that system in a defined location or territory, funds the unit, employs the staff and takes the operating risk. The franchisor earns from fees on sales; the franchisee earns from what is left after costs.

### What does a franchisee actually buy?

A licence to use the brand and system for a fixed term, initial training, an operations manual, supplier relationships and, usually, some territory protection. What is not bought is ownership of the brand or freedom to change the model. Item 11 of the Franchise Disclosure Document lists exactly what the franchisor is obliged to provide.

### Does franchising guarantee success?

No. A franchise supplies a tested model and removes much of the trial and error of a start-up, but the unit still depends on your market, your capital and your management. Royalties are owed on sales whether or not the unit is profitable, and Item 20 of any brand's FDD shows how many of its units closed over the past three years.

---

*Source: [FranchiseGrade](https://www.franchisegrade.com) — independent, FDD-derived franchise research.*
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