Right. You’re a business owner with a successful business and are wondering how to expand it? Depending on several factors, franchising could be your best option. It’s profitable, it’s proven and it can help you grow. But what is a franchise business? What are franchises? Essentially, the answer to these questions is that the franchisor or business owner sells the right to open stores/sell products/provide services using their brand, intellectual property and expertise. The business is then called a franchise, while the purchaser of these rights is known as the franchisee. But let’s take a step back and discuss the role of a franchisor. Who is a franchisor and what are their roles and responsibilities in this business relationship? Let’s take a look.

Table of Content
Table of Contents:

Prepare and provide the Financial Disclosure Document

Also known as the FDD, one of the franchisor’s first roles in building and establishing the relationship with a franchisee is to make this document available. So, what does it contain? It contains information about: 

  • Profit and loss
  • Business expenses/costs
  • Biographical information about the franchisor
  • Information regarding litigation/bankruptcy
  • Definition of fees, whether ontoing or initial

Manage finances 

As a next step, the role of the franchisor is to manage the business’ finances. You will need to be able to show your potential franchisees that you’re capable of running a tight ship. Your finances may range from marketing and advertising costs, leasing office space, employees as well as providing on-going training and support, which could end up time consuming and costly at the end of the day (for more on this, see below).

Marketing and building the brand

A huge chunk of a franchisor’s role is to do the brand’s marketing. Franchisees will rely on the consistency of the communication coming from the parent brand and they will therefore expect a specific tone of voice and visuals to be used in marketing communication. In addition, many franchisees pay fees for the marketing to be done by the franchisor in a special marketing fund, so managing these funds effectively is a big one. 

Vetting franchisees

A franchisor will also need to vet potential franchisees. While you may think that the business model is suitable for practically anyone and everyone out there with an ability to invest in your franchise, you’d be wrong. Franchising is a special type of animal. It requires certain skills and expertise to make it successful. This is why you need to hold careful and thorough interviews with potential franchisees at the outset of the recruitment and sign-up process.

Selecting sites and locations

Because the issue of territoriality is so important in franchising, it’s crucial for a franchisor to determine the best locations for the franchise to operate in all while ensuring that the franchisees don’t end up competing with each other in the same location. The franchisor would have done the prior research into demographics of each specific area, identifying opportunities for growth as well as potential new clients. 

On-going training and support

Say a franchisee is underperforming in terms of specific KPIs you set for them. Someone will need to help guide the franchisee back on the right track, but who would that be? You guessed it – the franchisor. The franchisor’s key role would be to ensure that there is consistency in service provision and where one franchisee struggles in a particular area, the expertise of another more successful franchisee could come in handy at events such as meetings where on-going training and support are provided. The ultimate benefit? Both parties win. 

Management of products/services

The franchisor also has to manage relationships with suppliers who provide proprietary products for the franchise business to be successful. These proprietary products refer to specific brand names that the franchise is associated with to provide for a level of consistency in the products/services being provided to the end customer.

Being a leader and communicating effectively

Your franchisees will always look up to you as a business leader and business owner for guidance and support – in good times and in bad times. Therefore, communicating essential knowledge to them on an ongoing basis, ensuring that the lines of communication are open and are a two-way street will also help build the brand, your business’ reputation and the relationship with your franchisees.

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Conclusion

These are just some of the roles required of a franchisor in the franchisor-franchisee relationship when a franchise investment is made. A franchisor and franchisee have a very special business relationship where one is there to provide guidance, training, support, marketing and more, while the other is required to adhere to the franchise’s policies – be they the brand name, reputation, quality of product/service provision or more. 

Considering building your own franchise? Why not speak to the experts at Fantastic Services!

Posted in Industry Insights