Franchisors and Franchisees Have Different Responsibilities
There are two main parties involved in every franchise: the franchisor and franchisee. By definition, the franchisor sells the franchisee the right to their trademark, brand, and system in exchange for franchise fees. They put the Franchise Disclosure Document (FDD) together. This is a legal document with 23 items that outline the relationship between the franchisor and franchisee, along with a detailed explanation of the fees to be paid and any other relevant information about the franchise. The franchisee runs the daily operations and receives support and training in exchange for franchise fees and ongoing royalties, along with additional capital that helps the franchise grow.
As you can see, franchisors and franchisees have different roles and responsibilities.
Providing Support and Training
Franchising is a good investment because the franchisor provides a franchisee with support and training to succeed. In exchange for franchise fees and ongoing royalties, franchisors will assist franchise owners with everything they need, from site selection to hiring and inventory to advertising.
Creating the Business Model
A benefit of franchising is that a franchise has a proven business model that the franchisee can follow to succeed. In addition to creating this business model, the franchisor controls a franchise’s scalability and can decide how big or small locations are.
Creating Marketing Materials
The only way for the word to get out about a franchise is through marketing campaigns. The franchisor is responsible for national marketing campaigns and providing franchise owners with the materials needed to advertise the business to their local community.
Managing the Brand
The franchisor is responsible for the brand’s image. Brand recognition is desirable to prospective franchise owners. Franchisors are also responsible for managing the brand’s products and services. They do this by creating standards for those products and services, as well as safeguarding the franchise’s trademarks. Protecting a business’ trademarks is a good way to ensure that it is one of the most profitable franchises out there.
Planning for the Future
Franchisors have to be goal-oriented and know where they want the business to go. Thus, they have to constantly keep up with industry trends and strive to improve the company where they can.
Setting Standards and Ethics
A franchisor is responsible for providing franchise owners with ethics and standards to operate the franchise business. There are standards in place in order to ensure professionalism across the franchise system. For example, there should be a system in place if sexual harassment allegations arise. If franchise owners don't live up to these standards and ethics, they can be disenfranchised and terminated from the franchise system.
Communicating with Franchisees
One of the most important roles of a franchisor is to effectively communicate with the franchise owners in the system. This ensures that every franchise owner is up-to-date on the best practices of the industry. It is important to set up times for franchise owners to meet and speak with each other.
A great way to allow franchise owners to meet up with each other is to set up annual retreats or conferences. With these events, franchisees can meet up in a casual environment to discuss best practices and how to run the business even better. Consultants, franchise owners, and franchisors can network with each other during these events.
Upholding the Brand’s Reputation
Bad press can be detrimental to the business. It is up to the franchise owners to provide the best services and products possible to ensure that customers keep coming back.
Following the Franchisor’s Rules and Guidelines
While there is no guaranteed success in franchising, the best way to ensure success is to follow the working system provided to you. This includes having employees wear the required uniform and advertising the business with the provided signage.
Daily Operations of the Business
With brick-and-mortar locations, franchisees are responsible for opening the store, overseeing the location’s sales, and closing the store at the end of the day. This is also true for a home-based business, which can include gutter cleaning and junk removal services. The business owner is ultimately responsible for the location’s success.
Paying Fees to the Franchisor
Franchising is a win-win relationship for franchisees and franchisors. They are reliant on each other's success. The franchisee reaps the rewards of a proven system and the franchisor gets a portion of the profits through ongoing fees.
Finding and Leasing a Building
The location of your business can be a make-or-break decision. You are responsible for finding a location (if brick and mortar) and paying the leasing fees.
Entrepreneurs who want to open a franchise must be organized in order to properly run the business. A franchise owner is commonly responsible for running the daily operations of the business, so they have to balance everything from meeting with customers and vendors, preparing payroll, and more. Thus, it will be up to you to determine if you want to dole out some of these responsibilities to others or if you can effectively manage your time to do it. Organization will be the key to the success of your franchise business.
Having a Hobby
A big problem with being a franchise owner is that you can experience burnout if you don’t have a hobby or interest outside of work. Symptoms of burnout include being mentally or physically exhausted; having headaches; anxiety and paranoia; and more. To avoid these symptoms, entrepreneurs who want to open a franchise must have interests outside of the franchise business. This can include listening to podcasts, reading books, playing a sport, or doing any other activity that brings you relaxation and joy. Avoiding burnout can lead to the success of your business and make it one of the most popular franchises to own.
Now that you know the difference between franchisors and franchisees, you may want to know some examples of each. Some of the biggest franchisor and franchisee examples are in the food and restaurant industry and include:
Franchisor and franchisee examples that are non-food related include:
Working with Franchise Consultants
As an entrepreneur who wants to open a franchise, you will want to work with a franchise consultant who will connect you with franchisors. These professionals will work with you to find the ideal franchise business based on your financial background, skills, background, and more. At no cost to you, the franchise consultant will give you guidance on your journey to owning a franchise business and make the process as simple and straightforward as possible. These constants are knowledgeable on everything from franchise cost to the FDD, so taking advantage of their services will only benefit you as a prospective franchise business owner.
But a franchise consultant wears another hat while working with franchisors. Similar to real estate brokers, these consultants are intermediaries between buyers and sellers of a franchise business. When working with franchisors, consultants make the discovery process easier by only recommending candidates who are serious about owning a franchise. This will save franchisors time and money when looking for quality entrepreneurs who want to open a franchise. Working with a franchise consultant is beneficial to both franchisors and prospective franchise owners.