The term 'franchising' is used to depict a wide range of business connections, however, in its most common use, it denotes Business Format Franchising. In Business Format Franchising, an organization licenses its brand names and demonstrated business strategies to others in return for a reoccurring license fee, a percentage of gross sales, or a standard fixed charge.

An organization that licenses its brand, trademark, and business strategies is known as a franchisor. A company or individual that pays to utilise a franchisor's brand, trademark, and business strategies is known as a franchisee. Franchisees open replicas of the franchisor's business and run them with the guidance, training, and supervision of the franchisor.

The connection between a franchisor and a franchisee is administered by an agreement called the franchise Agreement.

The franchisee agreement highlights the advantages, terms and conditions, limitations, and additional information of the agreement.