Summary Definition: An individual or entity that purchases the rights to operate under another company's name, trademarks, products, and business model.
A franchisee is an independent business owner who’s purchased the right to use an existing company's brand, name, knowledge, and intellectual property. The franchisee can use these resources to open and operate a third-party outlet known as a franchise.
The franchisee buys into an established business system owned and operated by a franchisor. In return, franchisees pay the franchisor an initial fee and ongoing royalties to use the resources and support the franchisor provides.
Usually, franchisees adhere to franchisor-set operational guidelines and standards. This arrangement allows the franchisee to benefit from a well-known brand, a proven business model, and ongoing franchisor support while having the independence to run their own business.
Do you run a franchise? Learn how Paylocity can help you grow.
These two terms, often confused, reference the two parties in a franchise:
The franchisee is responsible for most of the on-site business tasks (e.g., hiring employees and managing finances), but it benefits from having access to the franchisor’s suppliers and marketing material.
Simply put, the franchisor can be thought of as the mentor or "parent" of the franchisee.
The process of becoming a franchisee varies from industry to industry. However, there are several broad steps that are usually involved:
While there are several benefits of becoming a franchisee, there are also some challenges to be aware of.
|Lower initial overhead costs compared to starting a company alone
|Ongoing franchisor fees and royalties that reduce overall revenue
|Immediate brand recognition and a ready-made customer base
|Strict brand guidelines that can limit future marketing, branding, and supplier decisions
|Access to strong marketing resources, intellectual property, and supply chains
|Handcuffed association with the overall performance, publicity, and reputation of the franchisor
|An invested partner (i.e., the franchisor) who provides advice and support, such as leadership experience and employee engagement training
|Possible difficulties parting ways with a franchisor, including legal issues regarding contractual obligations, non-compete clauses, or restrictions on selling the franchise
Payroll doesn’t have to be complicated, but it does have to be right. Stay compliant, collect employee data, and streamline tax filing – all while putting time back in your day with our automated payroll software. With the assurance of an error-free workflow, you can get back to what matters most – your people. Learn how our modern solutions get you out of the tactical and back to focusing on the bigger picture.