In a franchise system,:

the franchisor operates a retail outlet using a name and format developed and supported by the franchisee.

the franchisee pays a lump sum plus a royalty on all sales in return for the right to operate a business in a specific location.

the franschisee has complete control over the store design, products or services sold, management training, and advertising.

franchisors receive all profits that the franchisees generate, and pay franchisees a fixed sum.

franchisees are responsible for advertising, product development, and system development.