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, from its tone to the offered products and services. Brand recognition is desirable to prospective franchise owners.
Planning for the Future
The franchisor has 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.
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 Franchise’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.
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: