Franchisor vs. Franchisee: The Two Sides of Franchising

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What is franchising? The two sides

The franchise model is increasingly recognised as one of the most straightforward and secure ways to start a business. But for a franchise to be successful, the franchisor-franchisee relationship has to work well, so both parties get something out of the partnership. Keep reading to find out about the two sides of franchising…  

Franchising helps brands grow across a given region quickly and efficiently, but it can be tricky to understand the potential opportunities and challenges of the model for each person involved. Here are the two sides of franchising. 

Franchising from the franchisor perspective

As a franchisor, you award licences to investors, allowing them to sell your products or services under your brand name and any trademarks and logos for an agreed period. These investors then become franchisees when working in your business, owning and operating their franchise units while adhering to your business model. 

Why be a franchisor?

  • Franchising is a cost-effective way to grow a business, as franchisees provide cash injections to set up new branches, and contribute royalties, which you can use to provide ongoing support. 

  • Once your support team is in place and you’ve perfected your training scheme, overheads are minimal, so you can gradually earn higher profits.

  • Having a network of franchisees managing your business units and a team of skilled staff to support them gives you time to focus on developing your brand as a whole. 

  • Franchisors usually see success, as franchisees have made a personal investment in their business and have a vested interest in making their unit succeed.

  • You’re able to expand into areas you’re unfamiliar with, thanks to the local knowledge your franchisees have when they launch a business unit in their own town or country.

Franchisor tips for running a franchise

  • Plan ahead - It takes both time and money to develop a successful franchise operation, but you’ll reap the rewards when your franchisees are on board and contributing regular fees. 

  • Take care with your franchise agreement - The franchise contract is your opportunity to influence how your investors proceed. If you forget to include an important clause before they sign it, you may have missed your chance, and risked damaging your brand forever.

  • Make sure you have enough capital during the initial stages - You may not be able to recover the money you spend developing a franchise model until you start recruiting investors. You’ll need enough working capital to cover ongoing costs until your franchisees start paying initial and ongoing fees, providing you with a regular income.

  • Don’t take your eye off the ball - Maintaining a positive brand reputation is crucial to your success, and franchisees have the power to damage it in an instant. There’s a risk some franchisees may try to adapt the style and direction of your business. Make sure you continually monitor activity to check your investors are consistently upholding standards across the network. 

Franchising from the franchisee perspective

The thought of starting a business from scratch can be daunting, so many would-be entrepreneurs opt to join a franchise. If you choose this route, you get the backing of a recognisable brand and a proven business model, and may start trading with an existing customer base. 

A reputable franchise will give you access to everything you need to launch and run a successful unit. As a franchisee, you bring your dedication, motivation and determination to the role to make your business a success. 

Why be a franchisee? 

  • You get to become your own boss with the added benefit of being supported by a recognised brand with a proven track record. The franchisor will have already tried and tested the business model, so your chances of failing are fairly low.

  • Starting an independent business from scratch takes a lot of time and money, but franchisors have already developed systems and processes for you, saving you a lot of headaches. 

  • You can access guidance and support from the franchisor and the franchisee network, learning from their mistakes rather than making your own, and gaining reassurance when you face challenges. 

  • Most franchises charge a marketing fee and take care of national campaigns for you, so you’ll benefit from brand awareness you probably wouldn’t be able to achieve on your own. 

Franchisee tips for running your own business in a franchise

  • Do your research - Before you sign on the dotted line, make sure you do your due diligence to check you’re investing in the right opportunity for you. Buying a franchise unit is a long-term commitment, so it's essential you look into the company’s background and the franchisor’s track record. A good franchisor will understand and support you in your research - after all, if you’re not right for the brand, you could end up damaging their reputation.

  • Ask about expansion ahead of time - As you develop your business and your confidence increases, you might want to expand your franchise portfolio by purchasing additional units in other areas. This process will only be possible if your franchisor allows it and there are available territories nearby, so it’s a good idea to ask about growth potential before you invest.

  • Be prepared to work hard - Signing a franchise agreement is no guarantee of success. You’ll have to be committed to the brand and dedicated to business growth if you’re to achieve a good return on your investment. 

  • Play by the rules - When you sign a franchise agreement, you agree to run your business according to the franchisor's specifications. You won’t have as much control over your unit as you would if it were your own independent business, but consistency across the network will help boost your success. 

Join the franchise industry and reach your full potential 

You can find out more about the two sides of franchising in our selection of informative franchise guides. Alternatively, browse the businesses currently recruiting new investors from the main menu.

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