A form of business arrangment in which a party which controls the supply of a commodity gives another party the right to provide that commodity to a given area or market base.

Franchises in the energy industry are based on geographical boundaries, and areas within these boundaries are referred to as franchise areas or franchised service territories. Utility franchises are usually granted by governments or regulatory agencies, and fees may or may not be charged for franchise rights.

Franchise rights aren't always exclusive. Depending on the situation, more than one company can be granted a franchise for the same service territory. Some municipal governments use utility franchise fees as a revenue source, and in some cases state governments may demand additional franchise fees for territories which have already been franchised at a local level by municipalities.

Energy franchises usually include non-exclusive rights to operate the equipment which necessary to serve customers within the franchise area, and to construct such equipment on publicly-owned lands.

See also: