Within a franchise system, there are two distinct roles, which are franchisor and franchisee. In this symbiotic business relationship, the two parties work together to grow and run a successful franchise business. Each one has a role that comes with its own specific responsibilities.
We often use the word “purchase” when talking about getting a franchise business, but it’s important to understand that the franchisor isn’t selling a business to a franchisee. Rather, the franchisor is selling the right to operate a business using the established system of that franchisor’s brand.
Like any company, a franchisor wants to increase the value of its business and it does this using the franchise model of opening as many successful locations as possible, thus extending the reach of the business and increasing the value of the brand. As the franchise grows, the franchisor’s revenue grows because it brings in more royalties.
Therefore, it’s in the franchisor’s best interest to support its franchisees so the entire business is healthy and can grow for the benefit of everyone involved.
The franchisor is responsible for the following:
- National marketing and advertising for the entire brand.
- Research and development of new products and services and managing products and services for the brand as a whole.
- Management of franchise territories to ensure all franchisees have a large enough territory to sustain them without infringing on another franchisee’s territory.
- Ongoing training for franchisees and their employees and/or training materials for franchisee employees.
- Evaluation of franchisees on a regular basis.
- Advice on running the business whenever a franchisee requires it.
- Business development opportunities for franchisees like owning multiple units.
- Recommendations of vendors to purchase from, often with deals in place for the entire company.
Frequently, franchisors will help their franchisees with things like market research to help them choose a location and will help them negotiate their lease agreements. Some franchises even help secure financing or provide financing themselves.
As a member of a larger team, when a franchisee runs a successful business, it helps the entire brand, which in turn helps all the other franchisees connected to that brand. Someone who has a good experience at a franchise location will remember that when they’re in another city and see the brand’s logo on another franchisee’s location. Effectively, one franchisee’s superb service may gain customers for other franchisees in this way and vice versa.
As a franchisee, a business owner is responsible for the following:
- Paying the franchise fee and paying royalties to the franchise to help run the larger business.
- Finding, leasing and building out a location for the franchise. (As mentioned previously, most franchises will help extensively with this.)
- Hiring and training employees. (Many franchisors offer training for management-level employees of their franchise locations, as well as training materials for entry-level employees, but franchisee’s will be responsible for making sure the entry-level employees are trained properly.)
- Running the business according to the standard expected of the franchisor.
Each franchise is different and a franchise agreement will outline exactly what is expected of both parties involved. Ultimately, both the franchisee and the franchisor are working together to build a stronger brand and grow the business. To find the perfect franchise, sign up for a free FranNet franchise consultation today and get on the path to success!