Higher Business Management – Understanding Business Practice Test

A franchise is a business arrangement where a brand owner licenses its name, proven operating system, and support to independent operators who run the business and pay fees or royalties. McDonald’s is a classic example because thousands of outlets operate under the same brand, using a standardized menu, branding, training, and supply chain, with many locations owned by different franchisees or corporate entities. The other options describe independently owned businesses rather than part of a franchised network: an independent local coffee shop, a family-owned bakery, and a government department store all operate without the franchisor-franchisee relationship and the standardized system that characterizes a franchise.