Are you considering a career change and looking into starting a new business through franchise ownership? Before you embark on this journey, it’s important to understand the differences between a franchisee and a franchisor, the two integral components of the overall franchising business model.
Typically, the franchisor is the company or individual who owns the brand, the rights to the intellectual property, the trademarks, and the system of operations that governs the business. The franchisee is the owner of the store or restaurant who invests money and time into the franchise, paying the franchisor various fees in exchange for using their proprietary information. It is important to understand that this two-person relationship is mutually beneficial, whereby both parties benefit from having a successful relationship.
In this article, we will answer some of the most frequently asked questions about franchisee vs. franchisor, helping you decide if this business model is right for you.
What Is the Relationship Between Franchisee and Franchisor?
In a nutshell, the franchisor gives the franchisee permission to use the company trademark and existing methods established by the franchisor. In exchange, the franchisee pays a franchise fee as well as other ongoing royalties and fees.
The relationship between franchisee and franchisor is mutually beneficial. The franchisee is given access to an established brand and system needed to start a business, reducing the need to research and develop from the ground up. The franchisor, on the other hand, has a partner who shares their enthusiasm and passion towards the brand, effectively multiplying their presence across the market. This also enables them to benefit from a larger pot of money being generated for the franchised business.
What Does a Franchisor Do?
A franchisor’s primary role is to provide the franchisee with all of the necessary resources to become a successful business owner. These resources typically include a trademarked brand, established systems and procedures, an operations manual, a list of vendor and supplier contacts, and training.
The franchisor should also provide the franchisee with ongoing support to ensure that the business is running smoothly and meeting all of the standards that the franchisor has set for it. This includes offering help with marketing, advice on running the business, and access to a variety of educational resources.
What Does a Franchisee Do?
As the owner of the business, the franchisee is primarily responsible for running the franchise on a day-to-day basis. This includes allocating the necessary funds for operations, making sure the business is in full compliance with all franchising rules, recruiting and hiring staff to run the store and managing customer service.
The franchisee will also be responsible for abiding by the rules set forth in the operations manual, implementing marketing plans approved by the franchisor, and paying the necessary franchise fees.
What Are the Benefits of Franchising for a Franchisee?
There are numerous benefits to being a franchisee. One of the main benefits is the ability to operate a business without the need to start from scratch. Purchasing a franchise gives you access to an established company, with all of the business support you need – training, branding, and marketing.
The franchisee also benefits from the potential for success that comes along with purchasing a well-known brand. This can help bring in customers, as well as providing the ability to open multiple stores, which increases the potential for higher profits.
What Are the Benefits of Franchising for a Franchisor?
For the franchisor, the primary benefit of franchising is the potential for growth. With franchisees, the franchisor can expand rapidly, with a presence in multiple markets and regions. This increases the company’s brand recognition, thus attracting more customers.
The franchisor also benefits financially from the franchise fees and royalties that the franchisee pays. This money can be used to reinvest in the company and for research and development of new products or services.
Franchising is a great way to start a business and grow a business. As a franchisee, you have access to all of the resources, training and support that can help you achieve success. For the franchisor, there is the potential for significant growth and increased brand recognition, as well as financial gain from the franchise fees and royalties.