The term franchising is used to describe a method of doing business that involves one party granting permission to use his proven methods of doing business to another party.  There is usually a fee for the permission and a percentage of sales.  The party granting the permission is a franchisor while the party doing the franchising is the franchisee.  

The most common, well known form of franchising is that of the food service establishment.  With the building of the US Interstate Highway system in the 1950s, came the most popular franchise of all, McDonald's.  McDonald's, like many others, is costly to start up and has a strict set of guidelines to follow. Franchises must hold up to surprise checks ups, and adhere to advertising and training guidelines.  All McDonald's franchisees must obtain a hamburger patty pressing workshop.  But McDonalds was not our first franchise.  In the 1930s A&W became popular, followed by Howard Johnsons.  We still have some A&W and Howard Johnsons around today.  

Another type of franchising is called product franchising or trade name franchising.  In this situation a franchisor may grant the franchisee the ability to see his name brand product, but no training, method, or strict set of guidelines are involved.  The franchisee is given exclusive rights to a certain territory in which to sell the products, and the franchisor earns royalties on gross sales.  Usually the royalties have to be paid whether or not a profit is being seen. The consequences are involved for the franchisee who cancels his franchise agreement before the contract is up are pretty steep so it's important to carefully consider the endeavor before jumping in, and giving it your best shot before giving up.

Franchising is not a simple matter of wanting to open a certain business and paying the money to the mother company. Many cities and businesses carry laws and regulations regarding how close together certain franchises are able to be built and run.