Equity franchise
A model in which the franchisor takes a minority equity stake in the franchisee’s company while simultaneously transferring know-how and the brand under a standard franchise contract. This co-investment aligns both parties' interests.
In practice
Equity franchising is more common in capital-intensive sectors — foodservice, hospitality — or to support high-potential franchisees with limited initial equity. The franchisor contributes its network, brand, and expertise in exchange for a participation typically of 20 to 40 percent. This structure requires clear governance: a shareholders' agreement covering exit rights, buy-back conditions, and share transfer procedures.