If you’re going to lead a network of franchisees to develop your brand, you’ll need to have a strong understanding of the definition of a franchisor. What is expected of a franchisor and what makes a good one? We answer these questions and more in this franchise guide.
Franchising your business is a big step to take. There’s no denying it’ll offer a route to expansion with less risk than going it alone, and if the company you’ve built is ‘franchisable’, it’s certainly worth considering appointing franchisees. But what exactly is the role of a franchisor?
What does a franchisor do?
As either an individual or a company, a franchisor grants a third party the licence to operate a branch or multiple branches of their business in a given location. The franchisor owns the rights and trademarks of the company and allows franchisees to use them to establish and develop profitable businesses.
From an entrepreneurial perspective, becoming a franchisor involves working alongside franchisees to grow a business efficiently and effectively. As well as granting rights, franchisors should provide initial and ongoing training and support to help their investors develop high-quality franchise units.
In return for providing access to their business model and continuous support, franchisors can request:
- An upfront franchise fee - This payment is essentially the charge for joining the franchise system. Franchisors use it to finance their recruitment and training programmes, so it shouldn’t make them any profit. Of course, it’s in the franchisor’s best interests to make sure the franchise fee is affordable for investors, otherwise they risk discouraging capable entrepreneurs.
- Continuing royalty/management fees - Most franchisees also pay regular fees - usually on a monthly basis - in return for the franchisor’s ongoing support and professional development opportunities. Normally, this payment is charged as a percentage of the franchisee’s gross sales, but some franchisors opt not to introduce ongoing fees if they make enough profit through product mark-ups.
The 8 key responsibilities of a franchisor
1. Provide a high-quality business model
Franchisors must make sure their franchisees can access everything they need to perform well under the brand. This rule applies at all times. It’s no good setting up a profitable business model when they recruit their first franchisees and then letting it fall by the wayside over time.
Most franchise investment packages include key elements like an operations manual, equipment, signage, marketing materials and business development support.
2. Recruit suitable franchisees
The success of a franchise depends on the quality of its franchisees, so franchisors should be prepared to put time, money and energy into finding the most suitable ones. Not only should investors have the potential to become great business owners, but they should also be committed to the brand and everything it stands for.
Sometimes, franchisors make mistakes and appoint a franchisee who goes on to breach the agreement. When this happens, it’s important the franchisor takes steps to resolve the problem with the investor and consider terminating the contract if things escalate.
>> Read more:
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3. Provide excellent business support
No matter how detailed the initial training scheme is, the franchisor must provide high-quality ongoing support. Franchisees take on someone else’s business model - and many don’t have entrepreneurial experience when they invest in it - so it’s vital franchisors guide them as they progress.
Ongoing support can include everything from one-to-one telephone and video call consultations to professional development opportunities and networking event invitations.
4. Run training and development schemes
Part of the attraction of franchising for franchisees is the opportunity to further their skills across all areas of business ownership. Franchisors want their investors to perform to the best of their abilities, which is why they often run training schemes in areas like people management, business planning and marketing.
5. Nurture the franchisor-franchisee relationship
Being able to develop a strong relationship with franchisees is crucial, as it’s often hard to collaborate effectively over time if two parties don’t get on well. This process begins during the recruitment stage, so if franchisors don’t feel they could work alongside someone, it’s best they continue their search for franchisees.
6. Develop long-term growth strategies
One of the most important responsibilities of a franchisor is to look at the future of the business and guide franchisees to help them grow their units. Rather than being motivated by short-term results, the brand owner must focus on the bigger picture - otherwise, investors may feel unsupported.
As part of this role, franchisors should develop growth strategies based on realistic timelines, and regularly review performance metrics to provide franchisees with accurate and timely feedback.
>> Read more:
- Franchising 101: The Complete Guide to Franchise Costs in the UK
- Franchising 101: How to Buy a Franchise Business in 10 Steps
- Franchising 101: The Official Franchise Start Up Checklist (Part 1)
- Franchising 101: Top 5 Qualities of a Franchisee
- Franchising 101: 6 Tips for Building Customer Loyalty Through Marketing
- Franchising 101: The Pros and Cons of Franchising Your Business
- Franchising 101: 6 Top Contributors of Franchise Failure
7. Produce brand-wide marketing campaigns
Franchisees usually carry out promotional activity in their territory, but another one of the key responsibilities of a franchisor is to run brand-level marketing initiatives. Often, business leaders develop adverts for television and radio, or online sites, helping to boost brand awareness and credibility across the network as a whole.
Meanwhile, franchisors should also support franchisees by making sure they have high-quality marketing materials for their own localised efforts.
8. Negotiate with suppliers to provide favourable deals for franchisees
Sometimes, franchisors specify the suppliers their franchisees can use. If the entire network buys products from a single company, it can access exclusive discounts, which filter down to the individual branch owners. It’s the role of a franchisor to make sure franchisees can access these favourable deals. No investor should be paying over the odds for products and damaging their profit margins.
More franchisor tips on running a franchise
If you haven’t yet decided to franchise your business, you should get advice from financial and legal professionals to make sure it’s the right choice for your brand. Franchising isn’t the right solution for every company, but it can be a great way to grow.
You can find more handy business guides and franchising insight right here at Point Franchise.
Alice Tuffery, Point Franchise ©