What Franchisors Must Know About Their Franchise and its Relationships

Individuals may explore franchise opportunities as transitioning executives or when seeking a way to achieve their wishes, hopes, and dreams for many reasons. Mostly, franchising is explored because of a perceived sense of security and confidence that a proven brand is expected to provide.

There is a plethora of information online about franchising and what should be expected when exploring and moving forward under a franchise agreement. But do franchisors and individuals at various levels of leadership truly understand the franchise relationship and what franchisees expect AND need to succeed?

Assuming nothing, let’s simply define the franchise relationship as a guide for the many individuals responsible for ensuring franchise success from the day the franchise agreement is executed and the franchise fee is remitted. This is something brand leadership should ensure everyone in the organization fully understands to effectively support the franchise relationship.

Simply defined, the franchise relationship is a business model that involves a franchisor (the parent company) granting the rights to use its trademark, brand name, proven business model, and support systems to a franchisee (the business owner) in exchange for an initial fee and ongoing royalties.

Franchising is meant to provide a mutually beneficial relationship between the franchisor and the franchisee. The franchisor benefits by expanding its business without incurring the capital costs, and the franchisee benefits by starting a business that already has a proven track record.

Before moving forward I’d like to pose the following question for senior franchise leaders to ponder: If each support member in your organization were given a test on the following, how many would fail? And one question for the same franchise leaders, would you pass this test, and with a perfect score?

Legal Agreement

The franchise relationship is governed by a legal agreement between the franchisor and franchisee. This agreement outlines the terms and conditions of the relationship, including the rights and obligations of both parties.

The legal agreement should be reviewed carefully by both parties, including all providing support to franchisees to ensure that they understand their obligations under the agreement. The franchisee should engage with a business attorney to help them understand the agreement and especially the repercussions and obligations should the agreement be in default or terminated.

Franchise support staff should also understand the agreement and specifically how their roles and responsibilities align with the agreement. All should be done to manage expectations with mutual understanding of what should be done and what can be done to move the relationship along for mutual benefit.

Interdependency between Franchisor and Franchisee

The franchisor and franchisee have a symbiotic relationship. The franchisor provides the franchisee with a proven business model, training, marketing materials, and ongoing support, while the franchisee operates the business under the franchisor's established brand name.

Franchisees rely on the franchisor for the ongoing support necessary to maintain and grow their businesses. For example, the franchisor may help with site selection, training, operations, and marketing. Franchisees are also expected to follow the franchisor's guidelines for quality control, branding, and operations.

Proven Model

The franchisor has already established a successful business model, which provides the franchisee with a proven track record. This track record can help to reduce the risk associated with starting a new business.

The franchisor should provide the franchisee with access to data and information that demonstrates the success of the business model. This information can help the franchisee to make informed decisions about the business and to develop a business plan that is tailored to the local market.

Trademark and Brand Recognition

The franchisee is granted the right to use the franchisor's trademark and brand name, which provides the franchisee with immediate recognition in the market. This recognition can help the franchisee to attract customers and build a loyal customer base.

The franchisor maintains control over the use of its trademark and brand name to ensure that the franchisee is using them in accordance with the franchisor's guidelines. This control helps to protect the franchisor's brand reputation and ensures that the franchisee is operating the business in a manner that is consistent with the franchisor's standards.

Support and Training

The franchisor provides support and training to the franchisee to ensure that the franchisee understands and can operate the business effectively. The support provided can include everything from marketing assistance to ongoing training to access to proprietary technology.

Training is an essential aspect of the franchise relationship. It ensures that the franchisee understands the franchisor's business model and how to operate the business effectively. The franchisor should provide initial and ongoing training to the franchisee to ensure that the franchisee is up to date on the latest developments in the industry.

Technology

Technology plays an essential role in franchising. The franchisor provides the franchisee with access to proprietary technology that has been developed and refined over time. This technology can include everything from point of sale systems to inventory management systems.

The franchisor should also provide ongoing updates to the technology to ensure that franchisees are using the latest and most efficient systems available.

Marketing

The franchisor is responsible for developing and implementing marketing strategies that support the brand and drive traffic to the franchisee's business. The franchisor should provide the franchisee with marketing materials and support that can help the franchisee to promote the business in the local market.

Let's Recap

The franchise relationship provides a mutually beneficial business model for both the franchisor AND the franchisee. The franchisor benefits from the expansion of its business without incurring capital costs, while the franchisee benefits from starting a business that has a proven track record and ongoing support from the franchisor.

The interdependency between the franchisor and franchisee is critical to the success of the franchise relationship. The franchisor provides the franchisee with support and training, access to proprietary technology, trademark and brand recognition, a proven business model, marketing support, and a legal agreement that governs the relationship.

The franchise relationship can be an excellent opportunity for entrepreneurs to start their own businesses while minimizing the risk associated with starting a new business from scratch. As well, it is an equally excellent opportunity for franchisors to expand their franchise system faster and wider than its financial resources may afford.

However, as important as it is for franchise candidates to thoroughly research the franchisor and the industry before investing in a franchise to ensure that it is the right fit for their skills, goals, and financial resources, it is equally important franchisors know and understand their own franchise system.

Specifically, it must be understood what is expected and what must be provided to ensure franchise success... and that starts with understanding all aspects of the franchise relationship as it is detailed in their own franchise agreement.

Make it a great day. Make it happen. Make it count!

Resources & Support

The future may be a bit bumpy for some, more so for others. Knowing who to turn to and when to turn to for guidance and help is important. Having resources at your disposal is also important. So, if you hit a wall, for whatever reason, please feel free to reach out to me for assistance or even if you just need someone to talk to. Please do not hesitate. You can reach me via a LinkedIn message, by email to [email protected], and by phone or text at (832) 797-9851.

Learn more about resources and support for franchise and restaurant brands at?Acceler8Success.com . If you’re interested in coaching for current and aspiring entrepreneurs, please visit?Entrepreneurship411.com .?