Franchisee - What is a Franchisee? A Complete Guide

07/06/2017 08:00 | Start a business

The thought of entering the world of franchise ownership may be daunting, but in truth it’s a great way to start a business with an established reputation and brand. So, what is a franchisee? Simply put, the person who permits the franchise license is called a franchisor. The person who gets the license to run the business is called the franchisee.

The franchise agreement means that the franchisee gets given all the parts of the successful franchised business needed to succeed. This includes everything from branding, products, supplies, designs and even marketing and advertising support. The support the franchisor provides runs for the length of the franchise agreement which is often the factor that makes a franchise business attractive to entrepreneurs.

The franchisee agrees to pay the franchisor for the benefit of the support and advise provided. This is usually an upfront fee plus regular payments as the business develops. Some franchise agreements state that the franchisee must pay more if the business gets more successful, but often a regular flat fee is paid.

Franchisee or entrepeneur?

If you’re looking to start your own business, then why should you consider becoming a franchisee? Firstly, unlike starting your own business from scratch, franchises provide a level of security. Expertise and experience in running your own business is not always necessary thanks to the franchisors support. The franchise organisation model offers the franchisee the ability to grow under a recognised brand and share in the benefits of a larger group of business owners. All of this, along with independently owning and managing a business, provides responsibility and intellectual stimulation for the franchisee.

But, really, what is a franchisee? Can a person who buys into a franchise business be defined as an entrepreneur? Franchise consultant Joel Libava, otherwise known as ‘The Franchise King’, has a clear opinion, “No. The person who came up with the concept, and invented the franchise system for that concept, is the entrepreneur.” But, that’s not truly the case. While it’s correct that franchisees buy into someone else’s system, they still have many responsibilities operating their business. In most cases, franchisees must hire and manage staff, attract and retain customers as well as create marketing campaigns - the same things entrepreneurs do.

As an entrepreneur (and as we’ve established, franchisees are entrepreneurs), there are so many advantages to starting a business by joining a franchise. The franchisor provides training programmes that teach franchisees how to run the business and continue to advice once the business is up and running. All the questions and concerns that need to be addressed as a start-up business can be answered by a well-established franchisor. Most importantly, the franchisor can help estimate how much money is needed to get the business started and how much working capital is necessary to keep it going. Not being able to forecast the amount of money needed is one of the difficulties of starting a new business.

What does a franchisee do?

So, what is a franchisee’s role? There are three main responsibilities that a franchisee has in order to succeed together with the franchisor:

  1. Stick to the proven franchise’s business model. Not only is having a framework in place one of the main advantages of a franchise business, but is absolutely crucial for the relationship and business to prosper.

  2. Protect the brand’s image. As a franchisee, you’ll play a role in protecting and upholding the brand’s image. This usually means complying with the franchise’s policies, and getting the OK from the franchisor when rolling out marketing campaigns. This ensures that stronger brand unity is built which helps the franchise business as a whole.
  3. Grow the business. At the end of the day, your franchise business is your business. You are responsible for its success and growth, with the support of the franchisor.

And just because you’re running your franchise empire, it doesn’t mean that you must work 9-5, Monday to Friday. Franchising can also mean flexibility. This can be particularly appealing to female entrepreneurs who want to achieve the ultimate work life balance. The British Franchise Association recognise the possibilities of franchise ownership for women and host an annual conference for potential franchisees to find out more. The theme of the 2016 event was ‘Empower – Engage – Educate’ and inspirational female speakers highlighted the entrepreneurial skill and creativity that women bring to franchising.

And there are plenty of successful females to look up to for women interested in becoming a franchisee, but this number is unfortunately on the decline. The latest British Franchise Association survey found that the number of female franchisees dropped from 28% in 2011 to 23% in 2015. However, this is still high compared to only 15% of non-franchised businesses being run or owned by women.

The fact that a record number of franchises are currently reporting profitability makes franchising an attractive proposition to male and female entrepreneurs alike. But what if you want to keep the safety net of your current job whilst building a business of your own? Is it possible to have the best of both worlds and take on a franchise role part-time? The answer is yes. There are many franchise options which are designed to be limited and involve tasks that can easily be done outside of normal business hours.

Similarly, working from home is also a possibility if working around the demands of family is necessary. As a franchisee, you’re in control of the business and so can set your own hours and work round your family. It is usually up to you how much time commitment you want to put in, but if you are looking to work round children make sure you choose the right franchise to fit in with your lifestyle.

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