September 23rd, 2005 Aaron J Hudson AMM 101 Dr. Silverman Chapter 6: Review Questions 13) A franchise is a license to operate an individually owned business as if it were part of a chain of outlets or stores. A franchisor is the individual or organization that would grant the franchise. The franchisee is the person of the organization that is purchasing the franchise. 14) A franchisor gains fast and controlled distribution of its products without incurring the cost of the construction and operation of its own outlets or stores. The franchisee gets the opportunity to start a business with limited capital and make use of the business experience of others. The franchisor provides guidance and advice to the franchisee if business problems were to occur. In turn, the franchisee provides a high level of motivation which leads to more sales which then leads to higher royalties for the franchisor.