What Is Franchising and How Does It Work
Contrary to popular belief, franchising is not the process of acquiring the entire franchise for your personal use. Instead, it is a legal agreement between you (the franchisee) and a franchisor to run a local “share” of their business under their brand name. In exchange for your initial franchise fee and ongoing royalties, you gain unlimited access to a fully developed business system and have the right to use their trademark and sell their products or services. You also receive ongoing support in terms of training, marketing, and management.
However, that’s only a part of the answer to the “what is franchising” question. Because franchising is not just about the individual relationship between you and the franchisor, but also about that between all franchisees in the system. It is a private network of like-minded people who share common responsibilities and goals in order to rise above the competition and satisfy the needs of a target audience. As such, any success or failure on your part will directly affect all franchisees under the company’s banner, as well as the franchisor’s overall reputation.
Who Does What – A Brief Look at Franchisor & Franchisee Duties
All of the above sounds good in theory, but how does a franchise business work in practice? In order to explain that, we will need to take a closer look at the individual responsibilities that are carried by each party member in this business relationship.
> What You Need to Do as A Franchisee
Signing your franchise agreement and paying all associated fees is just the start. As a franchisee you are expected to develop the franchisor’s business in an autonomous manner, so you will have to cover a variety of ongoing costs (equipment, supplies, etc.) until you get your place up and running. The second resource you’re expected to have is time. Even though you join a well-established brand, you will still need to learn its business model inside out.
Finally, you will have to meet an exceptionally high company standard in order to protect the brand’s reputation and win new customers over. To accomplish this, a franchisee will usually have to perform a variety of functions. Depending on the type of franchise you’ve decided to buy, those may include selling products/services directly to the customer, shopping for supplies, communicating with other franchisees, compiling regular sales reports for the franchisor, and making sure that all your employees are all happy and properly trained for the job.
> What They Need to Do as A Franchisor
The extent to which a franchisor can assist a newly fledged franchisee depends on a whole ocean of factors, some of which include the company’s line of work, size, financial stability, brand notoriety, and more. However, as a franchisee you can expect from the company to help you choose a suitable location for your new business, as well as provide you with a general building plan and a list of vendors from which you can buy all required furniture and equipment.
Of course, the franchisor is also responsible for providing ongoing theoretical and on-site training that could last from several days all the way up to a couple of months, depending on the contract’s terms & conditions. In addition, the company can also dispatch some of its staff to help you out with the grand opening and train each employee for you. You won’t be alone in the marketing and advertising field, either – the franchisor will provide you with pre-approved marketing materials and an efficient advertisement strategy to help you draw more clients in.
Advantages and Disadvantages of Franchising
Now that we have explained what is a franchise business, why would you need to join one? Well, this obviously depends on your personal goals. To help you decide if such venture is worth your consideration, we’ve included a brief rundown of its most notable merits and drawbacks.
> Advantages of Owning a Franchise:
- You can avoid many entrepreneurial pitfalls by following the franchisor’s footsteps;
- The economy of scale is your friend – buying in bulk substantially decreases costs;
- You will work under a popular brand name on a local or even a global scale;
- Your franchisor can provide you with financial backing when pilot testing new ideas;
- Your business will have an established market before you even set up shop.
> Disadvantages of Owning a Franchise:
- You need to make a substantial investment in the form of ongoing fees and expenses;
- You have to seek constant approval and comply with pre-established brand policies;
- You cannot alter the offered products or services unless the franchisor states otherwise;
- A typical franchisee working week consists of 60 or more hours of hard work, leaving you with little time to do anything else. You’ll also need to spend most of the time on site;
- Regardless of how well you run your business, a misstep made by either the franchisor or another franchisee will have its inevitable impact on your income and reputation.
https://www.thebalance.com/the-role-of-the-franchisee-1350415 (“The Role of the Franchisee” & “What Support Can You Expect from the Franchisor?” articles)