Introduction
A franchisee is a person or company that is
granted a license to do business under the franchisor's trademark, trade name,
and business model, by the franchisor. The franchisee purchases a
franchise from the franchisor. The franchisee must follow certain rules
and guidelines already established by the franchisor, and in most cases,
the franchisee must pay an ongoing franchise royalty fee to the
franchisor.
Franchising is a system for expanding
a business and distributing goods and services to meet higher consumer demand.
It’s based on a relationship between the brand owner and the local operator to
skillfully and successfully extend one’s established business system. As a
condition of obtaining or commencing operation of the franchise, the franchisee
makes a requirement payment or commits to make a required payment to the
franchisor or its affiliate.
From a business perspective, a franchise is
a contractual relationship between a licensor and a licensee for the
licensee to use the licensor’s method of doing business to distribute products
or services using the franchisor’s trade or service mark, or to offer, sell, or
distribute goods, services, or commodities that are identified or associated
with the franchisor’s trademark. While every franchise is a license, not every
license is a franchise under the law.
Role
of the Franchisee
A franchisee has four major
responsibilities for the success of the system in which they are granted a
franchise:
1.
To protect the franchised
brand by operating the franchise in strict compliance with system operating
standards.
2.
To build a strong and
loyal customer base by offering only approved products and services and by
providing superior customer service.
3.
To ensure that all
employees are properly trained and the franchise is properly staffed at all
times.
4.
To advertise and promote
the franchise and its approved products and services according to the
guidelines provided by the franchisor.
Advantages:
· Management Training
Support.
· Brand Name Appeal.
· Standardized Quality of
Products and Services.
· National Advertising
Programs.
· Financial Assistance.
Disadvantages:
· Franchise Fees and Ongoing
Royalties.
· Restrict to Standardized
Operations.
· Restrictions on Buying.
· Limited Product Line.
· Profit Sharing.
Types of Franchising:
1. Trade Name Franchising: Under this type of franchising, the franchisee buys the
right to utilize the trade name of the franchisor without distributing specific
items exclusively under the name of franchisor.
2. Product Distribution Franchising: In this type of
arrangement, a franchisor provides licensing to a franchisee to sell particular
articles under the brand name and trademark of franchisor through a selective
limited distribution network.
3. Pure Franchising: In pure franchising, franchisor provides a complete
business format including a license for a trade name, the products or services
to be sold, the physical plant, the method of operation, a marketing plan, a
quality control process, a two-way communication system and the necessary
business support services to the franchisee.
Attributes of a Successful Franchisee
- Be willing and able to learn new
skills. As the operating manager of a
franchise, you will take on a multitude of roles, from trainer, to
watchdog, to customer service, to financial advisor. The franchisor sets
the brand standards, but they are not responsible for how the franchisee's
day-to-day business is run. It is a steep learning curve, but if you can
master these new skills, you can become a successful franchisee.
- Be able and willing to follow system
standards. As a franchisee, you are chiefly
agreeing to follow someone else’s operating system, often including
specific requirements for what marketing materials to use, what suppliers
you must work with, and what specific products or services you must offer.
This, along with the licensing rights and restrictions on how you can use
the franchisor’s intellectual property, is what you are investing in. In
exchange for this ready-made operating system, a franchisee has to report
their sales and expenses follow instructions on how to present the
products and services, and comply with the franchisor’s advertising
requirements. Every day, week, month, and year, the franchisee will
be following protocols set up by the franchisor. If the franchisee fails
to meet those brand standards, they risk being in breach of their
franchise agreement.
- Be ready to move from big business to
small business. The former corporate
middle manager, who wants to be a franchisee has a broad understanding of
business, knows how to work within a system, knows how to motivate staff,
and certainly is no stranger to long hours. But a franchisee is
essentially a small business owner, which means leaving behind the
internal support services they have grown accustomed to, as well as the
many benefits that come with employment at a larger company, such as
retirement plans and paid sick days, expense accounts, and health
insurance plans.
As a franchisee, your success is measured
each day in your franchise's performance, requiring more self-reliance than
many corporate managers have had to demonstrate.
However, a well-structured franchised
system will provide a level of support that contributes to the franchise's
success.