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Franchisor and franchisees are two key roles in the franchise system, but they play two very different but interdependent roles.
The franchisor is the supplier of the franchise system, and the franchisee is the buyer of the franchise business. Franchising is a business model based on copying, which is why many franchisees mistakenly believe that their ideal franchisee should be an exact copy of themselves. Although this is far from the truth.
Generally speaking, a franchisor is an entrepreneur, a “thinking person” who has vision and belief, and is prepared to support his or her beliefs through measures sometimes based on ideas that have not yet been tried.
In contrast, franchisees are people who like to abide by established rules and systems. You want to own your own business, but you are unwilling to start from scratch and would rather pay for franchise rights to run someone else’s business.
Franchisor vs Franchisee
There are many differences between a franchisor and a franchisee. The franchisor is usually an entrepreneur, while the franchisee is more a manager. The franchisor should be satisfied with uncertainty, while the franchisee prefers security. The franchisee can easily complete the task, but cannot initiate it, which is done by the franchisor, who is a visionary. Franchisees are usually good at sales and marketing, while franchisees prefer to be able to realize the company’s vision.
Franchise is a specially defined legal relationship that includes brand logos, but is different from trademark licensing. Although the franchise is an independent subsidiary, the franchise must operate in accordance with established rules.
Role of Franchisor
Franchisors are usually entrepreneurs who lay the foundation for a successful and stable company. He or she brings the following valuable assets to the franchisor’s relationship with the franchisor.
1# Effective Business Model
To become a franchisor, you must reach the point where your business model is irrefutable. Consumers recognize your brand and search for your product or service as it becomes well-known brands.
2# Registered Trademark
Recognizable trademarks are some of the most valuable assets obtained by franchisors through in-depth research and trial and error. It usually takes a lot of time and effort to establish a recognized trademark and ensure federal rights to that trademark.
3# Established Business in Place
The franchisor has developed a business management system that can provide reliable results. The franchisor has a complete business model, from customer service to product and service delivery, and franchisees will follow this model.
4# Training and Support
One of the franchisor’s most important contributions is comprehensive training and continuous support. Under the guidance of experienced entrepreneurs, franchisees learn from successful people.
Role of Franchisees
The role of the franchisee is essentially to replicate the successful business model of the franchisor and help them enter the regional or national market. This is by no means a passive role and requires a lot of investment and labor, including:
1# Payment of Franchise Fees
Franchisees must pay franchise fees and a percentage of gross profit to be eligible to open franchise stores. Also, the revenue and advertising costs.
2# Franchise Location Management
The franchisee puts the franchisor’s business system, training and knowledge into practice in their location. Essentially, franchisees have the foundation to succeed in their franchise locations, but they independently control day-to-day operations.
Before starting or purchasing franchise rights, it is important to understand the roles of both parties in the franchise system.
Advantages of Franchising for Franchisees
Franchising provides several advantages for franchisees. Franchisees use brands and well-known brands, which allows them to avoid all errors and problems related to entrepreneurship. In addition, customers are more likely to be loyal and easy to find, especially if the company is well-known and the brand is well-known.
The franchisor is responsible for product development, marketing, advertising activities and supplier negotiation. This reduces the burden on franchisees, who can now turn their attention to staff training and customer service.
Most franchisors provide financial assistance to exempt the franchisor from the obligation to obtain funds from external sources. Another benefit that franchisees give to franchisees is the ability to buy businesses with little or no experience.
For example, a person may not have medical knowledge or experience, but if they hire a doctor for them, they can buy a doctor’s office now. The franchisor has ensured that everything is the rule and everything one should do accept.
Disadvantages for Franchisors
It seems that the franchisor wins more, but there are disadvantages. For example, franchisees that do not meet company standards or accidentally create public scandals can cause serious damage to the entire brand.
For example, a Starbucks franchise manager was charged with racial profiling after ordering the expulsion of two African Americans. Regarding race and discrimination and how the company prohibits such behavior. As a result, Starbucks lost more than $12 million in sales.
This makes training and support for franchisees a challenge. This may distract the franchisor from your overall brand vision, which includes developing innovative products, staying ahead of the competition, and improving marketing techniques.
In addition, the franchisee can permanently terminate the relationship with the franchisee, but continue to use the intellectual property rights that violate the terms and conditions. For the franchisor, this may be a serious legal issue.
Because some franchisees have never worked in the commercial sector before, effective training of franchisees can be challenging. This will affect the success of franchising and its compliance with industry standards.
Conclusion
Being part of a franchise is not for everyone, but you will like the answer to the question “What is a franchise?”. Buy a company with a good track record and make it work for you, then joining a franchise may be your ideal choice.
One of the most important aspects of franchising is “controlling” others. Both parties will bear significant financial costs. Before signing the contract, the investor or franchisor must use the services of an experienced lawyer or franchise consultant.
Only when the franchisor and the franchisee perform their responsibilities and obligations in accordance with the terms of the legally signed franchise agreement, their relationship will flourish and the business will expand and develop.
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