Most entrepreneurs are enthusiastic about launching a new business venture. Who wouldn’t be excited?
But some people, on the other hand, prefer the less hazardous alternative of starting a business under a well-known and popular brand.
Folks who are worried about losing money in a new business venture may find franchising to be a more enticing option than the typical business launching route.
Find out what franchising is and the subsequent roles of both the franchisor and the franchisee.
Franchising 101
A commercial agreement in which a company owner licenses the right to use another firm’s business model, name or names, logos, and trademarks is known as franchising.
An individual or organization often pays an initial franchise fee to the franchisee. They also have to make regular royalty payments for continuous use of the system and intellectual property.
Franchises are used by some of the country’s most well-known brands. Retailers, restaurants, hair salons, and auto businesses are among them.
Many people prefer to open a successful business over starting their own because of brand awareness.
So, the franchisor and franchisee are essentially business partners.
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The Tasks of The Franchisor
The franchisor is usually an established business owner who has built the groundwork for a successful business.
Essentially, the franchisor owns the business at large.
The said business owner brings to the franchise agreement the following valuable assets:
A Recognized Trademark
A franchisor’s registered trademarks are among the most valuable assets they have accumulated via painstaking research and trial and error.
Establishing a well-known trademark and gaining federal rights to that mark often takes a lot of time and effort.
A Time-tested Business Model
To become a franchisor, you must have proof that your company plan works beyond a reasonable doubt, a.k.a. a proven business model.
Consumers are aware of your brand and actively seek out your goods and services.
You need to have a solid business model in place.
Training and Support
Extensive training and ongoing support are two of the franchisor’s most essential contributions.
Franchisees learn from someone who has proven success under the supervision of an experienced entrepreneur.
Solid Business System
The franchisor has established a franchise system that provides consistent outcomes.
The franchisor has a well-established business model that franchisees will follow, from dealing with customers and clients to delivering products and services.
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Downsides of Being A Franchisor: Franchisee VS Franchisor
While it appears that franchisors get a better deal, they are entrusting their brand to people who are frequently strangers.
The franchisor and franchisee must trust each other and keep each other’s end of the bargain.
If a franchisee fails to satisfy company standards or causes a public scandal, the entire brand may suffer.
Franchisee selection, training, and support become a company in and of itself.
If the franchisor is still running a direct-to-consumer company in addition to working with franchised outlets, this could distract him from his own business.
Franchisees that elect to stop their relationship with the franchise or continue to use intellectual property in violation of the franchise agreement are in breach of the termination agreement.
The franchisor may face legal issues as a result of this.
The Tasks of The Franchisee
Although it may not be as much as what independent business owners have, franchise owners are business owners.
Here are some areas of your franchise business where you can make whatever changes you want after you pay your initial franchising fee.
Recruitment
It’s not easy to pick the right people to work with. The truth is that outstanding help is hard to come by.
Try picturing going through resume after resume to find the right person. However, this is advantageous when dealing with people with whom you do not get along.
You get to choose who you work with, not the parent business, regardless of how difficult it is to develop a core team at first.
You also set the compensation packages and salary estimates for each position, from the top to the lowest.
Staff Management
Franchisees supply you and your employees with training tools and classes, which you should make use of.
They’re beneficial to both your franchise and your employees’ personal development.
You can also look into various sorts of training and incorporate whatever interests you into your own program.
Employee development allows employees to gain new skills and information, allowing them to take on more difficult duties and think more creatively.
You are also in charge of your reward system.
If you want to reward top achievers with extra cash or paid time off, your employees will know it’s from you, not the franchisor.
Marketing
You must have sufficient funds to cover franchise costs, but how you manage your funds is entirely up to you, particularly when it comes to marketing.
You’ve already gotten a good start because the franchise name is well-known, but you can still work on broadening your reach.
That’s why franchise location is another crucial factor to consider.
Participating in local fairs and sponsoring community activities, for example, is a great marketing approach for attracting attention to your company.
And you’ll have complete control over the event, including communicating with the organizers, setting up your booth, and everything else.
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Daily Operations
It’s part of your job to keep track of who comes and goes in your own business, so expect to take on a lot of responsibility.
There are franchise systems in place, to be sure.
A franchise restaurant, for example, must follow the franchisor’s preparation and cooking guidelines.
Everything else, like procuring supplies, contacting vendors, dealing with payroll, and so much more, will fall on your shoulders.
Often, management software, such as QVALON can help you streamline your operations by using checklists and surveys, allowing you to focus on other aspects of your organization.
Customer Service
Customer service is a crucial component of your company that should be prioritized.
You, like other franchisees, wear the established brand name.
Fortunately, you’re in command.
So you may consult with the frontline staff and conduct audits to see what you can do to ensure that your clients receive the best possible service.
There has to be ongoing support for your clientele.
The Downsides of Being A Franchisee
Franchisees’ capacity to source raw materials, ingredients, completed products, and promotional items are usually limited.
In many circumstances, the franchisee will have to buy things directly from the franchisor or from a list of approved vendors that the franchisor provides.
This is too restricting for some folks.
They also don’t like being clumped into the small business owner’s territory.
Remember that franchisees must pay the franchisor a royalty charge, which may increase over time.
This may reduce franchisee profits.
If the national brand’s reputation is damaged, the franchisee’s business may lose consumers and revenue.
That’s why the franchisor and franchisee must work hand-in-hand to maintain their good name.
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Final Thoughts: Franchisee VS Franchisor
When it comes to running a business, both franchisees and franchisors have advantages and disadvantages.
Even if the franchisor originated and established the firm with the brand and trademark, the franchisees are still responsible for ensuring that they are informed on how to run the business.
They’re also responsible for establishing a solid business model before being open to any franchise agreement.
They are in charge of promoting and developing new products and services.
When it comes to operating the stores, they have limited accountability and duty.
The initial franchise fees and royalty payments can also be used to generate profit.
Franchisees, on the other hand, are spared the difficulties and setbacks that come with beginning a business.
In exchange, the franchisee pays for the rights to use the name and general framework of the established business.
They concentrate on employee training, ensuring client satisfaction, and keeping the store running smoothly and efficiently.
Given this, the franchisor and franchisee must have the passion and desire to ensure that the business functions successfully.
