The franchised business system has two sides that play different roles in the business.
The franchisor provides the franchise system, who maintains the business model and trademarks.
The franchisee is the franchise system’s purchaser, who utilizes the business model and licenses the trademarks.
Advantages of a Franchise Business for the Franchisee
The franchise business model is an excellent model for first-time business owners as it connects them to a team of people experienced at operating successful franchise locations.
Although success is never guaranteed with any business and a franchise business is no different, the franchisor has a vested interest in seeing the franchisee’s success. If they do not, then the franchisee’s location could close, leading to the franchisor not generating franchising fees.
Franchises help their locations tap into the global supply chain, which can be very difficult to access. There are many different contracts, business models, laws, payment terms, and potentially other spoken languages that must be understood and navigated.
Developing a brand is a long term process that is very expensive and difficult. By entering into a franchise business, the franchisee has a license to utilize a well-known brand for only the cost of the franchise fees.
It can also be challenging for people to gain access to business capital, especially if they are first-time business owners. Some franchisors can help by directly providing financial assistance or have access to a network of potential lenders.
The Responsibilities of the Franchisor
- Creating a brand that is recognized and is well known.
- Developing the brand’s products and services.
- Establishing and maintaining relationships between suppliers and the franchisees.
- Ensuring that the staff of the franchisees have access to proper training.
- Managing advertising for the brand as a whole.
The Responsibilities of the Franchisee
- Managing the business in a way that meets the goals of the franchise.
- Managing the finances and inventory for the location.
- Hiring and training new agents for the location.
- Managing the advertising for the brand’s location.