Franchising explained: how fast-food giants grow without owning their restaurants
When you walk into a branch of a global fast-food chain, there is a good chance the brand on the door does not own the restaurant. Most of the world’s biggest chains are majority-franchised — McDonald’s, for example, reports that around 95 percent of its restaurants are run by independent franchisees.
How the deal works
A franchisee pays an upfront fee and then ongoing royalties, usually a percentage of sales, plus contributions to national advertising. In return they get the brand, the recipes, the supply chain and a tested operating manual. The franchisor collects a steady stream of high-margin income without paying to build or staff each location.
Master franchises: one partner, a whole country
In large or complex markets, brands often sign a single master franchise partner. Yum China, spun off from Yum! Brands in 2016, is a well-known example: it operates KFC, Pizza Hut and other brands across mainland China under long-term licences, adapting menus and store formats for local customers.
The trade-offs
- For the brand: fast growth with little capital, but less direct control over service quality.
- For the franchisee: a proven model, but rigid rules and fees that are due whether or not the store is profitable.
- For customers: consistency — the same product in every city — which is the whole point.
Whenever a chain announces a “refranchising” programme, it usually means selling company-run restaurants to operators and moving further towards this asset-light model.