Franchisor definition - What is a franchisor? A complete guide

A franchisor is a person or company that grants the license to a third party for the conducting of a business under the franchisor's marks. The franchisor owns the overall rights and trademarks of the company and allows its franchisees to use these rights and trademarks to do business. That’s the official answer to ‘what is a franchisor?’, but what does it really mean?

Being a franchisor is all about creating and developing relationships with your franchisee partners and, together, expanding and growing your brand in ways that you could not achieve by yourself. You essentially become the leader, directing your franchisees to achieve operational consistency and brand integrity. Your franchisees will put their trust and faith in you to support and advise them and, in turn, you’ll put your trust and faith in them. This is the only way to succeed in a franchising relationship.

Research has found that the UK franchise industry growth is at a record high and many franchisors are considering extending the reach of their franchise businesses overseas. With the franchise industry seeming to be remarkably recession proof, it appears that now is a great time to consider becoming a franchisor.

Franchising or simply selling your business?

But how do you know whether to become a franchisor, or simply sell your business? The first question to answer is whether your business is ‘franchiseable’. Franchising is a flexible format and all types of businesses can be franchised. There are some basic characteristics, however, that must be met. Your business needs to be credible, unique, teachable and provide an adequate return. If your business meets the British Franchise Association criteria then franchising offers a great opportunity to grow your business fast and an alternative to selling your business if money, time or resource is an issue.

There are also many advantages to franchising your business. Here’s just a few:

1. Grow your business. Franchising is a cost-effective way to expand your business. Franchisees take responsibility for the cost of new premises and staff which means you don’t need to spend your own capital or secure additional funding.
   
2. Management delegation. If you choose the right franchisees then they’ll be motivated to make a success of their business. Not having direct managing responsibilities will allow you to have more freedom to develop your operating systems and brand expansion.
   
3. Money maker. As the franchisor, you’ll receive ongoing payment from the franchisee. While the franchisee meets all the costs and collects the income, you’ll receive franchise fees and royalties or a mark-up on products sold by the franchisee.

What does a franchisor have to do?

Now you know the pros of franchising your business and you’re certain that becoming a franchisor is for you, then you need to be aware of your obligations. So, what is a franchisor? Here’s 5 key roles and responsibilities that a franchisor must undertake:

1. Select qualified franchisees. 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. People may have the capital to operate their own business, but may not have the qualifications to follow an established system, which is what a franchise is all about.
   
   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. Give your franchisees access to you. As a franchisor, it’s your job to pass on your knowledge and experience 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 unit staff understand their role in the franchised operation. This is crucial if all staff are to have the skills to be effective in performing their job responsibilities and duties. And this support doesn’t stop when the franchisee is up and running. 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 helps to oversee the entire operations of the franchise network.
   
   
3. Protect your brand. Your branding is what will make your franchise system stand out. Your brand must be consistent and robust, otherwise, advertising money will be wasted since the customer will not have confidence in the brand. If the brand does not resonate with its audience, the entire franchise system suffers.
   
   
4. Develop marketing standards. As a franchisor one of your primary 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.
   
   
5. Be an awesome communicator. The relationship that is built between the franchisor and the franchisee is the key to the success of the business. As a franchisor, you need to regularly inform franchisees of new ideas, marketing, or training updates. Communication holds the same values as customer service. If you do not have good customer service skills, you probably do not have good communication skills. Without communications skills, the franchise system will not survive.

And this is just the start. There is much more to franchising. 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.