What is a Franchisee?
The thought of potentially taking ownership of a franchise may be a rather daunting process, but in reality, it’s actually a great method to starting a business with an established reputation and brand name. So, what is a franchisee? A franchisee is an individual that purchases the license from a Franchisor that will in turn grant them the right to ‘replicate’ their established franchise opportunity. The Franchisor will allow the franchisee or investment group to operate with the Franchisor’s trademark, trade name and business model that has to date, proven to be so successful.
You can’t just purchase the license and accept that it’s yours to operate as you feel best, as the franchisee you are expected to follow rules, procedures and guidelines that have been set out by the franchisor in question. The franchisee will in most cases pay an upfront fee when acquiring the franchise rights and they will then be expected to make regular payments as an ongoing management service fee or franchise royalty and these are usually between 5% - 9% of turnover per month. A portion of this fee will then in most cases go back into a group marketing budget that the franchisor will spend on your behalf.
The reason an individual sign’s the franchise agreement is because it outlines all of the key elements of the successful franchise business that you’re intending to buy. Franchise agreements will include elements such as the right to the franchise branding, products, supplies, marketing, designs, fees, uniform designated franchise territory, supplied leads and data. The Franchisor will be required to supply adequate franchise training prior to the commencement of the franchise and they will be entitled to supply franchise support throughout the tenure of your franchise agreement. The ongoing franchise support means that you’re ultimately in business for yourself but not by yourself, and this is exactly why the franchising route has become such an attractive avenue for investors.
If you’re looking to be your own boss and start your own business, then why should you consider the route of becoming a franchisee? Firstly, unlike starting your own business from scratch, the franchise route provides a higher level of security. Expertise and experience in running your own business is not always necessary thanks to the franchisors support. The franchise organisation model offers the franchisee the ability to grow under a recognised brand and share in the benefits of a larger group of business owners. It’s key to remember that franchisees are not classified as ‘entrepreneurs’, the franchisor that started the business from scratch before successfully replicating the model is known as the entrepreneur. One other key factor for why individuals may choose the franchise route is the fact that franchisors will be in a position to forecast how much capital is required to get the business started and how much working capital is required to keep the business operational until the sales start to come in.
The Role of the Franchisee
- Stick to the proven franchise’s business model – This is a model that has been replicated for a reason, it works well and doesn’t need tweaking. Follow the franchise model and you should reap the benefits the franchisor has enjoyed.
- Protect the franchise brand’s image. As a franchisee, you’ll play a role in protecting and upholding the brand’s image. This usually means complying with the franchise’s policies and terms. If the franchisor feels that the brands image has been damaged by actions you have taken as franchisee then they could ultimately seek to cancel the franchise agreement due to a breach. You’re not just representing your own business, but the franchisor and other franchisees within the network and reputation is crucial to ensure a successful franchise network.
- Grow your franchise business. At the end of the day, your franchise business is your own business. You are responsible for its success and growth, with the support of the franchisor.
You should ensure that you’ve chosen a franchise that suits your lifestyle and ambitions, don’t just choose a franchise to maintain the standard 9-5, Monday to Friday, franchising can be flexible for you as the franchisee!
The fact that a record number of franchises are currently reporting profitability makes franchising an attractive proposition to business investors. There are many franchise options which are designed to be limited and involve tasks that can easily be done outside of normal business hours and to ultimately operate a work from home franchise.