Being an entrepreneur is an exciting and rewarding experience. It can provide an added sense of freedom and autonomy that working for someone else may not offer. Aspiring entrepreneurs may find franchising to be an excellent option, as it allows them to expand their own business while being supported by an established brand. However, there are many aspects of franchising that stay-at-home parents re-entering the workforce may not understand. Here, we will address the frequently asked questions (FAQs) regarding franchising’s most important concepts, the relationship between franchisor and franchisee.
What is a Franchise?
Put simply, a franchise is a legally binding agreement between a franchisor (owner of the brand) and a franchisee (new business owner) whereby the franchisor grants the franchisee the right to use the franchisor’s proprietary brand, trademarks, marketing, systems, and processes to open a business with a pre-defined structure and operating requirements. In exchange, the franchisee pays a one-time fee, as well as ongoing royalty payments.
Who are the Franchisor and Franchisee?
The franchisor is the owner of the brand, and is responsible for setting up franchise operations. They will invest in the product or service’s development and management and provide the franchisee with the personnel, equipment, and infrastructure needed to launch their business.
The franchisee is the new business owner. They will typically invest money in setting up the business in exchange for the right to use the franchisor’s brand, trademarks, marketing, systems, and processes. The franchisee is then responsible for running the business in accordance with the franchisor’s guidelines and procedures.
What are the Benefits of Franchise Ownership?
One of the biggest advantages of becoming a franchisee is the reduced risk associated with launching a new business. Franchises are extensively tested and proven, with a much higher success rate than other types of start-ups. Additionally, as the franchisee, you’ll have access to the franchisor’s extensive library of resources, including staff training manuals and operational processes.
What are the obligations of being a Franchisee?
In exchange for the reduced risk of launching a franchise, the franchisee is usually bound by numerous obligations. These include abiding by the franchisor’s standards and procedures and adhering to any local or federal laws that may apply. Furthermore, the franchisee must agree to pay an upfront franchise fee and ongoing royalty payments to the franchisor.
What is the Difference between a Franchisee and Depending on the Size of Their Business?
The most major difference between a franchisee and an independent business depends on the size of their business. Larger franchises tend to offer more of a turnkey business system with extensive resources, as well as greater brand recognition and customer loyalty. On the other hand, smaller franchises may require more involvement from the franchisee and may not offer as many resources or brand recognition.
What is the Role of a Franchise Broker?
Franchise brokers are independent agents who specialize in the acquisition of franchises. They will assist prospective entrepreneurs with finding the best franchise opportunities available and guide them through the process of acquiring and launching their own business. Franchise brokers can provide invaluable assistance to new and experienced franchisees alike, as they are knowledgeable in the industry and have access to vast resources that can help to maximize their franchise’s potential.