DECA Entrepreneurship Practice Exam 2025 – Complete Study Resource

A franchise is defined as a business model in which an individual or a group—often referred to as the franchisee—receives the rights to operate a business that is part of a larger company's established brand and operational system, known as the franchisor. This relationship allows the franchisee to benefit from the franchisor's brand recognition, proprietary products or services, and training programs, all of which are crucial for success in a competitive market.

Franchises operate under a legal agreement that specifies how the franchisee can use the brand name, the operational processes, and often details regarding marketing initiatives. This system enables the franchisee to gain access to resources and guidance from the franchisor while independently running their business. Thus, the essence of a franchise is captured in the concept of leveraging an established brand to facilitate business operations and maximize potential profits.

In contrast, the other options describe different types of business structures that do not align with the specific characteristics that make franchises unique. Non-profits do not operate for profit and typically focus on a social mission, partnerships refer to cooperative business ventures that do not necessarily include brand licensing, and standalone businesses lack the brand affiliation that is fundamental to a franchise agreement.