Studies of organizational type in rural entrepreneurship have concentrated on independent vs. branch establishments. Franchising is a third organizational alternative that is growing dramatically in the retail and service sectors. Franchising entails an agreement by the owner (franchisor) to grant to a franchisee the right to use a name and business format in return for an initial fee and sales royalties. Theories of business organization indicate that franchising may reduce the risk of firms planning to locate outlets in rural areas. As a consequence, franchises may become more popular in the rural consumer and producer service sectors. The actual effect of franchising on rural service enterprises is not clear. Franchises may simply replace many local businesses, or they may offer new services not previously available. Most government and private business databases do not distinguish franchises as a separate organizational category.