FRANCHISE SPEAKER: FRANCHISING 101 – HOW FRANCHISEES AND FRANCHISORS WORK

Franchise speakers and futurists are commonly asked: How does franchising work, and how do franchisors and franchisees work together to create successful business models? Such insights are especially important to know if you’re thinking of opening up a location, or signing on with an existing firm as a licensee. For those of you who’ve inquired, our team put together a brief guide that should take you through the basics. Turning to today’s best-known franchise speakers and futurists, we present an overview of how the business model works:

• Franchisor: The company that owns the brand and concept. The organization develops the business model, brand identity, and operating system.
• Franchisee: The person who purchases the right to operate a franchise location using the franchisor’s brand, processes, and support model. Like franchise speakers and futurists note, each will pay an upfront franchise fee.
• Franchise Agreement: A legal contract that lays out the terms between franchisor and franchisee. Details fees, territory, standards, marketing, duration of agreement, etc.
• Operating Model: Franchisor provides initial and ongoing training, operating manual, marketing guidelines, supply partnerships so locations maintain brand consistency.
• Fees: Franchisee pays an initial franchise fee, ongoing royalty percentage of sales, marketing contributions and other set fees defined in contract.
• Territory: Franchisee is assigned an exclusive territory protected from competition by other franchisees. Dense locations follow rules on proximity.
• Franchisor Support: Per top franchise speakers and futurists, franchisor provides guidance on real estate selection, opening, operations, marketing, HR, and ongoing support through field consultants and corporate team.
• Supply Chain: In addition, franchisor establishes approved suppliers and distribution networks for goods, services and equipment that franchisees utilize.
• Growth: As franchisees open more locations, following the proven business model, it allows the brand to expand rapidly in a scalable way, as franchise speakers and futurists frequently remind.

Add it all up and franchising allows brands to grow by selling their operating model and support to franchisee owners looking to capitalize on an established brand.