Franchising 101: What is a Franchisor?

If you’re new to franchising and aren’t quite sure what a franchisor is, this article is your go-to guide. Or, if you are a current business owner looking to expand your business through franchising, these are the responsibilities you will have as a franchisor.

Franchising contributes massively to the UK economy. According to the 2018 BFA-NatWest Franchise survey, the UK franchise industry has created 710,000 jobs and is currently worth £17 billion. The last seven years in particular have been ground-breaking for the franchise industry - almost 48,000 franchise units currently operate in the UK, which is an increase of almost 25 percent since 2011.

Therefore, it’s clear to see why many entrepreneurs are choosing to start a franchise or franchise their own business. Today we answer the question ‘What is a franchisor?’, so franchisees can have a better understanding of what to expect when investing in a franchise. And business owners considering becoming franchisors can feel more confident with the roles and responsibilities.

What is a franchisor?

A franchisor is a person or company that grants the licence to a third party for the conducting of business under their brand name. The franchisor owns the overall rights and trademarks of the company and allows franchisees to use these rights and trademarks to do business.

The main element of being a franchisor is creating and developing relationships with your franchisee partners and, together, expanding your brand in ways that would be unachievable on your own. You essentially become the leader, directing your franchisees to achieve operational consistency and brand integrity. Trust is essential for a successful franchising relationship - your franchisees will trust you to support and guide them and you’ll trust them to run their franchise honourably.

What is the franchisor responsible for?

Here are seven key roles and responsibilities that a franchisor must undertake:

1. Selecting the right franchisees

Fundamentally, it’s your business and so it’s in your interest to choose franchisees who understand your franchise's concept and are committed to operating the system according to the established standards.

• While entrepreneurs may have the necessary capital to operate their own business, they may not have the skills or qualifications to follow an established system, which is paramount to the successful running of the franchise.
• Therefore, don’t be hasty and recruit the first potential franchisee that shows an interest. As a franchisor, you should be aware of where the franchisee is getting their funding and what their repayment terms are. If the franchisee can’t fund their new business adequately, then this will cause problems in the long run.
• Lastly, your chosen franchisee should be entrepreneurial minded, but not so much that they cannot work within your specified franchise system.

2. Providing leadership

You’re in charge and need to set standards for the type of working environment and staff mentality you want to have.

3. Giving franchisees access to your expertise

As a franchisor, it’s your job to pass on your knowledge and expertise to the franchisee to ensure their success, as well as the success of the entire system. Franchisees will look to the franchisor to provide training for them and their teams to ensure that all staff understand their role in the franchised operation. And this support doesn’t stop when the franchise is up and running.

4. Providing ongoing support

Most franchise agreements require franchisors to provide ongoing support to franchisees. This includes technical and day-to-day operating advice. Part of this franchisor responsibility involves overseeing the entire operations of the franchise network.

5. Protecting your brand

Your branding is what will make your franchise system stand out from the competition. Your brand must be consistent and robust; money spent on advertising will be wasted if the customer cannot trust the brand. If the brand does not resonate with its audience, the entire franchise system suffers.

6. Developing marketing standards

As a franchisor, one of your main responsibilities will be to develop marketing standards for promoting your brand, legally protecting your trademarks and establishing quality standards for your products and/or services.

7. Being a great communicator

The franchisor-franchisee relationship is the key to the success of the business. As a franchisor, you need to regularly inform franchisees of new ideas, marketing and training updates. Communication holds the same value as customer service - if you don’t have good customer service skills, you probably don’t have good communication skills. Without communications skills, the franchise system will not survive.

Summary: key characteristics of successful franchisors

• Share experience and industry know-how with franchisees and employees
• Provide franchisees with the tools they need to operate their own franchise location to the brand standards you’ve set
• Be honest about any challenges the business may face and what you plan to do about them
• Create a buzz for the brand through promotions and excellent marketing strategies
• Set clear short-term and long-term goals for the brand
• Have the leadership skills to inspire franchisees and employees
• Be more interested in establishing a pool of loyal customers and getting word of the brand out there than simply receiving the royalty fee
• Be willing to go above and beyond for the success of franchisees

A final thought for potential franchisors…

What we’ve mentioned in this list is just the start. As a start-up or experienced franchisor, it’s important to understand that franchising your business is a continuous journey of improving business systems and expanding your brand.

Ensure you speak to a proper franchise solicitor, a franchise consultant and the franchise departments of your bank – all as a minimum. Use a British Franchise Association-accredited solicitor who can advise you on the correct steps to take to start the franchising adventure.

We have a wealth of information for aspiring and existing franchisees and franchisors; for instance, our ‘Franchisor and Franchisee: The Importance of a Strong Relationship’ article here.