There are numerous advantages for an established business that possesses the necessary copyrights, trademarks and intellectual property to become a franchisor. A franchisor is provided with several outlets to distribute its goods and services without the financial investment and challenges of operating these outlets.

The franchisor is compensated by the franchisee initially in exchange for a package of goods, services, and other rights. However, continual compensation is typically derived from periodic royalties based on a percentage of the sales or purchases as well as payment for goods and services provided.