The success of a franchise is dependent on both the franchisor and the franchisee knowing their roles and performing them effectively. Without understanding these roles, both parties will become frustrated and the business could fail. Even though franchises are a proven business model that can be replicated in different markets, it doesn’t mean the business is guaranteed to succeed. Let’s look at who is supposed to be responsible for what in the Franchisor/Franchisee relationship.
First it’s important to understand that the franchisor is the person who has a successful business model, and is selling the right to use that model to another person or entity. The franchisor has established the initial successful business with systems so it can be replicated by another person in another market.
The Franchisors Roles and Responsibilities:
The franchisor needs to put the franchisee in the best possible situation for success. Therefore they need to put things together in a way that the franchisee can use them to run the business and understand why the franchisor does things a certain way. The first thing the franchisor has to show potential franchisee’s is the,
Financial Disclosure Documents (FDD)
It will include the following information for the franchisee to understand the business and decide whether they want to move forward with the business.
- Profit and Loss
- Business Expenses
- Definition of Fees
- Information on Litigation or Bankruptcy
- Initial fees and ongoing fees
The franchisor should be looking for a particular type of franchisee. They want someone that can successfully implement the franchise and grow it. Normally they would choose someone that is a master franchisee or a regional franchisee. They’ll want to establish someone that can build the business in multiple locations and grow the business. So they will sometimes be picky in who they choose. They will go through a process of,
- Shared mission and vision for the brand
- Not Just a Person with Money
- Experience in the Industry May be needed
- Interested in expanding the brand
Because the Franchisor knows the business, they will be in charge of choosing where the business should be located. This may take time to decide as there may need to be some market studying to determine the location that best suits the business money. Different factors may make a location good for the business or not.
- Location of the Master Franchise
- Visibility of the Brand
- Foot / Car Traffic
- Location / Brand Association, Luxury Brands may require a location that is associated with luxury
The franchisor will have created a franchise system that when operated properly will get the best result. This system will be taught to the franchisee and to their staff. The staff will learn about how the business should operate. There will be a period of time before the launch and during the first 6 months where there will be heavy training and support.
- Training and Support
- Operational and Staff Handbooks
- Staff Training
- Customer Service
- How to make or sell the products
Franchisee Roles and Responsibilities:
The franchisee is the person or company that purchases the franchise from the franchisor. The franchisee is responsible for operating the business and making a profit. Franchisees by their contractual agreements must run the business system in the way that the franchisor trains them.
Protecting the Franchise Brand
The franchise brand is under the protection of the franchisee. This is a big responsibility as one person can cause a lot of problems for the franchise. This can create bad press that could affect the brand as a whole, not just locally but also internationally.
Building the Business
The franchisor wants to do business with a person or company that can build the business. The business isn’t magic, it requires hard work to grow it to create a multi-branch franchise. This means investing in the franchise and expanding it to take more market share.
Hire and Train Employees
The franchisee after getting their initial employees trained will be responsible for finding and training more employees as staff move on or as the brand grows. It’s important for the franchisee to be able to find good people quickly and train them well.
Advertising and Marketing
Though the franchisor will probably give most of the marketing materials and handbooks on what to do to market the business. The franchisee is responsible to make sure the advertising and marketing is done effectively so that there is enough business coming in. That means utilizing the localized website, Facebook, google, and other marketing channels.
The franchisor and franchisee relationship is very important for the success of the franchise. It will require hard work from both parties to find success together. Remember that if the relationship is good and the roles are clear, the sky is the limit on the success of the business.
By Ryan Russell (CEO of Myanmar Business Answers)