The Role and Responsibilities of a Franchisee, Defined The Yin to the Franchisor's Yang, franchisees are essential to the functionality of the business model.
By Jeff Cheatham Edited by Carl Stoffers
Key Takeaways
- Franchising infrastructure relies on strict adherence to mandated systems and operational controls.
- Franchisees must operate within the confines of the brand's business model.
- Franchisees are responsible for financing the purchase and operation of the franchise, including initial fees, ongoing costs, and royalty payments.
This story appears in the September 2024 issue of Start Up.
Franchising is built on strict adherence to mandated systems and operational controls. These include specific roles and responsibilities for franchisors and franchisees.
Most simply: Franchisors are the brand. They grant licenses to franchisees to do business under the brand's name and trademark. When a franchisee signs a franchise agreement, it's crucial that they abide by their expected role and responsibilities to uphold the name and standards of the brand.
Here's what anyone hoping to enter this ecosystem needs to know about being a franchisee.
The franchisee's role
Franchisees must adhere to a long list of demands related to owning and operating a licensed business, and not everyone is cut out for it. The role requires operating strictly within the confines of the brand's proven business model, and remaining in compliance with the franchisor's recommended procedures — which extend to systems, presentation, and protocols.
In essence, the franchisee's job is to "color inside the lines," and failure to do so could jeopardize the franchise agreement. The franchisee needs to sell the product or service according to the franchise's provided standards, which increases the likelihood of keeping the business successful and financially viable.
A franchisee also assumes the role of being a consumer-facing representative of the brand. They must put in the time and effort to own and operate a successful business, with a constant focus on meeting sales goals, expansion, and new opportunities. In franchising's tried and true "hub-and-spoke'' business model (in which the franchisor is the hub, and the individual franchisees are the spokes), the role of all franchisees requires them to report to the franchisor as well as collaborate with their peer group of franchisees.
The franchisee's responsibilities
First and foremost, franchisees are responsible for purchasing and funding the franchise, though franchisors may offer financing or recommend third-party financing providers. Costs associated with franchise ownership include the initial franchise fee, associated costs to elevate the business, ongoing capital, and recurring royalty payments. Franchisees are also responsible for comprehending the franchise's business model and operating the business in accordance with the franchisor's operations manual.
Additionally, franchisees are also expected to attend the brand's mandatory training sessions, which provide the knowledge necessary to train others and ensure that they possess a complete understanding of how the business functions. Franchisees may also be responsible for pooling money toward co-op advertising, marketing, and promotions to fund outreach that attracts consumer interest in the brand's product or service.
When it comes to representing the brand, it is a franchisee's responsibility to continually protect and defend the brand's reputation, avoiding any behavior or activities that could potentially harm the franchisor's standing.
With the guidance and assistance of the franchisor, franchisees are also responsible for attracting and building a customer base, while generating revenue in line with the brand's benchmarks for success. If required, franchisees must participate in validation sessions and attend organizational meetings, conferences, and annual corporate retreats.
Lastly, the franchisee may be required to provide timely financial reporting on all business activities, so that the brand can track individual unit progress and profitability.
The roles and responsibilities of individual franchisees are designed to ensure their operations run smoothly and in accordance with the franchisor's proven business model. Though owners may come from different backgrounds and stages of their lives, the obligations, roles, and responsibilities inherent to being a franchisee are designed to ensure the success of the franchise brand that they represent.
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