Franchisor vs. Franchisee: What’s The Difference?

Franchisors and Franchisees Rely on Each Other for Success

What is the difference between a franchisor vs. franchisee? At the most basic level, the franchisee invests in the franchise, while the franchisor provides the working system, training manuals, and support to the franchisee in order to get products and services to the public.

They rely upon each other in order to form a successful business. The ideal franchisee-franchisor relationship includes collaboration, being community-driven, and having a growth mindset. Their relationship should go beyond just business and should grow into a family-like unit with care on both sides. Both the franchisor and franchisee have different responsibilities.

FRANCHISOR RESPONSIBILITIES

Set Up a Proven Business Model

For any franchise to succeed, the franchisor must provide the franchisee with the proper training manuals, logos and branding, website, social media, operating system, and whatever else is necessary to make the business run. The franchisee must follow these instructions in order to ensure maximum efficiency and success.

Provide the Franchise Disclosure Document (FDD)

The FDD is a legal document that contains 23 sections with information about the franchise, any fees that will be charged, and information about the legal relationship between the franchisee and franchisor. Franchisors must give prospective franchise owners this document at least 14 days before they invest in the franchise.

Training and Ongoing Support

To ensure a smoothly-run business, all staff members must be trained to know how to make sure it operates properly. Franchisors provide initial training. Franchisees must follow the instructions provided to them by the franchisor and train their employees accordingly.

Establish Branding and the Trademark

The franchisor is responsible for creating the look and feel for the brand, which includes the logo, colors and corporate identity.

Identifying and Establishing Exclusive Suppliers/Proprietary Materials

What makes a brand its own is the exclusivity of its suppliers and products. No other company distributes 7-Eleven coffee and products besides 7-Eleven. That’s what makes the brand special. To make the brand stand out from the rest, the franchisor works with suppliers to create proprietary products and services.

Provide Leadership, Especially During Times of Crisis

If the COVID-19 pandemic has taught us anything, it is that a crisis can strike at any time. It is the responsibility of a good franchisor to be present and support franchisees during times of crisis.

Branding and Marketing on a National Level

If nobody hears about the business, nobody will patronize it. This is where social media and marketing come in. The franchisor is responsible for branding and marketing on a national level and providing marketing materials and campaigns to the franchisee to promote the business locally.

Creating a Corporate Culture

A friendly and open corporate working environment is essential in any franchise system. To form this working environment, the franchisor can host annual conferences, provide opportunities to bring franchisees together, and more. This will make franchisees feel welcomed and a part of a “franchise family.”

FRANCHISEE RESPONSIBILITIES

Follow the Proven System

A mistake that franchisees make is not following franchisor’s proven system. It wouldn’t make sense for Planet Fitness to offer massages at one location and pasta at another, for example. Franchisees must stick to what the franchise is meant to do.

Be an Ambassador for the Brand and Uphold its reputation

The reputation of a brand is only as good as the franchisees who operate under its name. If a brand is known for a low-quality product and bad service, nobody will want to go to that business. One wayward franchisee can create a bad reputation system-wide.

Find, Build and Lease a Location

Location is critical for the success of any business. A franchisee should do market research to see if there is demand for the business and find a territory where that demand is greatest.

Pay Royalty Fees

Owning a franchise can be a huge investment financially. A franchisee has to pay a significant franchise fee and ongoing royalties in order to have the rights to operate the franchise.

Hire, Lead and Manage a Team and Ensure They Follow a System

Leadership is critical to the success of any franchise. Employees must be trained in the franchisor’s operating system to ensure continuity. A brand is known for its similarities in all locations and franchisees need to uphold that continuity.

Advertise and Market the Business Locally

Word of mouth is one of the most effective tools at the disposal of a franchisee. If customers don’t come, the business fails. The franchise has to reach out to the community to ensure the business has regular customers that keep coming back for more.

Manage the Success and Growth of the Business

Franchisees are responsible for the daily operations of the business. The franchisee must keep financial records, hire staff, order inventory, and ensure the function of the day-to-day and long-term success of the business.

Financially Support the Business

The franchisee is responsible for providing the capital to buy and run the business. They have a vested interest in seeing the business grow and succeed. Many franchisees put their entire life’s savings into the business.

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