Summary Definition: An established company that grants others the rights to sell products or services using its name, brand, and intellectual property.
A franchisor is an individual or company that sells or grants the right to operate in its name. They’re often established businesses with a widely recognizable brand identity.
Other parties, known as franchisees, then use the franchisor's name to sell products or services. Franchisees typically have access to the parent brand's suppliers, training material, and marketing assets.
Becoming a franchisor allows a business to grow quickly the number of locations in which it operates. By leveraging a franchisee's local market knowledge, the franchisor can grow its customer base across a wide geographic area with fewer overhead costs and less direct management.
These two terms, which reference two parties in the business franchise relationship, are often confused. The "franchisor" can be thought of as the mentor or parent of the "franchisee."
The franchisee is responsible for most aspects of the business, such as hiring employees and managing finances. But they benefit from having access to the franchisor’s infrastructure, such as suppliers and marketing material.
What a franchisor does varies depending on the business model and the individual franchise agreement.
Common responsibilities of a franchisor include:
A franchisor offers their franchisees the opportunity to run a business minus many of the risks associated with building an independent startup.
In addition, franchisors typically assume the role of a mentor to their franchisees. They provide ongoing guidance and support on general business strategies, such as hiring and training staff, boosting employee engagement, setting up, and maintaining equipment, advertising products or services, or sourcing supplies.
In exchange, a franchisor is usually paid an initial startup fee, an annual fee, and a percentage of the franchise’s profits.
Becoming a franchisor reaps several benefits, including:
Franchisors exist in most industries, from food and hospitality to health and wellness. Here are a few examples of well-known franchises operating in the United States:
Not every business can become a franchise, and franchising has various entry-level requirements. These include:
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