The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
What Is a Franchisor?
A franchisor builds a brand with an original store, but he may wish to expand this brand. One way of doing this is to allow other people to open a store to sell the franchisor’s goods or services. Then, the franchisor offers other people their brands, their expertise and their intellectual property. This means that the franchisor is the first person to use his concept of the store, but other people expand the store’s presence.
What Is a Franchisee?
The franchisee is a business owner, but he does not have to build the business from the ground up. The franchisor has already done this, and the franchisee purchases the rights to build his own store. This store is known as a “franchise.” Because he purchased a franchise, he has the right to use the franchisor’s proprietary knowledge, trademarks and associated brands. In the process, he must maintain the franchisor’s rules and regulations and promote the same brand.
The Ins and Outs of Being a Franchisee and a Franchisor
What is the Difference?
The franchisor acts as a mentor to the franchisee and may take part in the following activities:
- Permits the use of the store’s brand name.
- Trains the franchisee on business practices and how to run the business on a day-to-day basis.
- Provides the franchisee with the vendors and suppliers that the franchisor uses.
- Offers the franchisee the advertising materials and marketing programs needed to run the business.
- Guides the franchisee throughout the years on business administration matters, marketing and operations.
- The franchisee must pay for the franchise and agree to run the business as the franchisor directs by doing the following:
- Ensure that the franchise’s reputation is intact in the location that the franchisor chooses.
- Purchase everything for the franchise and pay all utility bills.
- Continue to learn what is expected from the standards and operations of the business.
- Follow all of the franchisor’s rules about how to operate the business.
- Take the brand usage guidelines and follow the franchisor’s business marketing strategy.
Benefits of Becoming a Franchisee of a Franchisor
Purchasing a franchise requires that you pay several costs, but you may decide that these costs are worth it. For example, you must pay a fee at the beginning that allows you to operate the franchise, and you will pay an annual fee as well. In addition to that, you will pay the franchisor a portion of your profits. In return for paying all of these fees, the franchisor will act as a mentor to you throughout the time that you are in business. The franchisor will have an interest in your success with the business, so the franchisor’s help will be invaluable to you.
Becoming a franchisor also has its benefits. For example, offering franchise opportunities to people in distant locations gives the franchisor the ability to expand his franchise without having to do the work himself. Also, expanding one’s business requires the owner to increase capital expenditures. By franchising, the franchisor can increase its market share without increasing its capital expenditures.
Is the Franchisee the Owner of the Business?
Yes, the franchisee owns the business. As the owner of the business, the franchisor will license the company’s products to you for use in your store. When you sign a contract with a franchisor, it will stipulate that you must use the products and services that the franchisor offers you.
Can You Be Fired as the Franchisee?
The franchisor cannot fire you as the franchisee. However, you must follow all of the franchisor’s rules because the franchisor will have the ability to shut your franchise down if you break them. For example, if you are not keeping your store clean and providing a safe environment according to the guidelines of your state, the franchisor can shut you down immediately.
A franchise is for you if you don’t have a product or service that you want to develop. Becoming a franchisor is best for you if you have a large company that is enjoying success right now. Many new franchises are being added to the list of franchises, so there are ample opportunities for people interested in these types of businesses. It only requires that you take the time to find them.
Written by Taylor McKnight, Author for Franchise Direct