what a franchisor and franchisee control in a franchise


For a first-time entrepreneur, being a franchisee is a great solution. A franchise is an extension of an established (and successful) company concept. The franchisor holds the brand ownership, including the logos, name, operational systems, and brand names for products and services. Franchisors have previously shown the viability of their concept, and they grow their business by offering franchisees the right to run their brand.

When you purchase a franchise, you begin your company with a well-known and established brand. Customers are already familiar with your company’s name and have an idea and expectations about the services you offer. Your role is to supply the services or products to clients in the manner the franchisor determines to be the most successful.

What the Franchisor Exercises Control Over

You are required by your franchise agreement to follow the franchisor’s model. This model encompasses numerous non-negotiable features of your company operation:

  • Branding – Although this is a broad subject, it encompasses everything a consumer sees, from the business logo and corporate colours to the services and products. Consistency fosters consumer trust and recognition, which the franchisor actively preserves.
  • Advertising Aspects – Again, in the interest of uniformity, nationwide or regional marketing and advertisements are included in your franchise costs. The franchisor promotes your business on your behalf, allowing you to concentrate on income generation. With the franchisor’s agreement, franchisees may sometimes pay for local advertising, but the latter retains control of the brand and message.
  • Systems Used in Daily Operations – The franchisor’s success is partially attributable to their optimised methods for success. As a franchisee, this implies that all employee training programmes, cleaning practices, uniforms (if applicable), and financial reporting procedures are pre-established and proven. Even when you own the business, you implement someone else’s business model.
  • Franchisee Options – You may establish your business if you like, but a franchise needs the franchisor’s consent. Why? Because although you may take as much risk as you want in your own venture, a franchisor will consider your application in light of their business’s growth strategy. As a franchisee, you are the franchisor’s representative, and as such, you must satisfy specific conditions to be authorised.
  • Fees for franchising – Although they are pre-negotiated, you will pay various costs to run a franchisor’s model. In return, you will get support with your business’s establishment, training, marketing, and running.

What the Franchisee Exercises Control Over

A franchisee must adhere to the franchisor’s regulations specified in the franchising agreement. However, do not despair—you have a variety of tasks to handle on your own.

  • Recruiting – You get to choose your personnel, seek and hire employees who are a good match for your franchise location’s requirements.
  • Revenue and sales – Once you’ve configured your business location, it’s up to you to establish a client base. As a franchisee, you benefit from walk-in clients who recognise the brand and become familiar with you. However, networking and marketing your products or services can help you grow your company. While the franchisor and other franchisees will assist, you will be responsible for the legwork.
  • Accounting and financial management – Certain franchisors provide integrated accounting solutions to simplify your life (and guarantee that they receive their revenue-based fees as laid out in the agreement). You are still responsible for managing it and keeping it current. Similarly, the franchisee is responsible for any company financing or operational capital.
  • Payroll Functions – As a franchisee, you will pay your staff directly, which means you must manage cash flow while adhering to local wage and labour rules.
  • Dedication and Commitment – Hard work and persistence pays dividends, and a franchisee is no exception. Two critical components of success are your work ethics, and commitment and you, as a franchisee must possess both the desire to succeed and a commitment to the franchisor brand.

Investing in a franchise is a prudent approach to company ownership. You will transform the franchisor’s established and profitable business model into a self-sustaining business asset. While franchisees give up some power in return for operational support and brand awareness, the company structure is beneficial to both the franchisee and franchisee.

If you want any more information on working smarter, contact the experts at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact form, and one of our experts will contact you as soon as possible to answer all your questions.

Thanks for reading,
The Franchise Institute Team
1300 855 435

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