The Difference Between a Franchisor and Franchisee

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If considering franchising as a way of escaping the nine-to-five, you’ve probably got a lot of questions. While franchising is a great way to take your first step toward a business empire, there’s a lot to know—and do—before getting started.

In this article, we’ll examine the most important dynamic – the difference between a franchisor and franchisee.

What is Franchising?

Franchising is a business model that involves an individual buying into a larger company in order to open their own branch or office.

For example, an individual could buy into Trustist. After an initial fee and training, they would open their own branch of Trustist and take advantage of the company’s branding, suppliers, and marketing efforts.

There is a wide range of franchise businesses available in the UK. The start-up costs can range from a few hundred pounds to hundreds of thousands, depending on the brand.

The Differences Between Franchisor and Franchisee Infographic | Franchise Local

What is the Difference Between a Franchisee and a Franchisor?

Two components make up the bulk of franchising: the franchisor and the franchisee.

For a simple explanation, the franchisor owns a franchise company while the franchisee buys into the franchise, taking on its branding and intellectual property.

Let’s dive into the roles of each and see how they help bring a franchise to life.

What is a Franchisor?

When a business has achieved a certain amount of success, it’s natural for the owner to look at growth and expansion, both nationally and internationally.

Instead of spending a huge amount of time wading through red tape and spending tons of money, the business owner can become a franchisor.

This means that they will allow individuals to set up branches of the company in new locations and then run them according to pre-set guidelines, thereby becoming a franchisor.

A Proven Business Model

In order to be successful, the franchisor’s business model will have been tried and tested in a number of locations and will be easily transferable.

Recognisable Branding

A franchisor’s business model will usually include distinctive branding, which most people will be easily able to spot on their local High Street, such as McDonald’s and Starbucks.

Established systems and suppliers

The franchisor benefits from bulk purchasing, which lowers costs, and has robust operational guidelines to ensure consistency across all franchise units.

Training and support personnel

In order to make sure that all of the above happens as it should, the franchisor will normally have a training and support team in place to ensure that the running of each individual franchise is consistent and effective.

Franchisor Benefits

The benefits to the franchisor are:

  • They earn money in fees
  • Their financial outlay for expansion is minimal
  • They can expand quickly
  • They can expand internationally without hassle
  • Their brand becomes increasingly well known

What is a Franchisee?

The franchisee is the other side of the equation: the individual who buys into the franchisor’s business.

The franchisee will pay an initial fee to the franchisor, which secures their business and gives them access to the company’s branding, supplier, and training. They will also pay a monthly fee – usually a percentage of their earnings – to the franchisor as part of their franchise agreement.

Franchisee Benefits

When somebody starts their own business from the ground up, there are lots of risks. Choosing a franchise business instead has several benefits, including:

Reduced risk

As the franchisee is buying into a successful, established business, the risk of failure is significantly reduced.

Low Cost

Starting your own company is an expensive business with many unexpected expenses.

In comparison, a franchise is a relatively low-cost business – with many options starting from just a few hundred pounds for a start-up fee. These lower costs can make the dream of owning your own business much more accessible.

Lending a Hand

With any new business, there’s a good chance that you’ll need to secure funding from a bank or other financial organisation. Banks are extremely cautious about handing out loans to new, unheard of businesses; particularly since the beginning of the pandemic.

On the other hand, a franchise business tends to present a much safer bet to a lender because the business already has an established customer base. This means that the franchisee is significantly more likely to be successful with their loan application.

A Support Network

Setting up in business for yourself can be pretty lonely – not to mention stressful, particularly when having to manage employees and to make sure that all your legal ducks are in a row.

With a franchise business, you have a ready-made support network of people who know what you’re going through and who can offer real, actionable help and advice and training.

Become a Franchisee with Franchise Local. At Franchise Local, you’re just a few steps away from becoming your own franchisee. Take the time to learn about the industry with our expert-written Tips & Advice. For the essentials, we recommend:

Looking for a comprehensive understanding? Dive into our Ultimate Guide and learn everything there is to know.

Remember, the franchising world is vast. With the right franchisor, you can take your business prospects to the next level.

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