The Difference Between Franchisor and Franchisee

Understand the Different Roles Between a Franchisor and a Franchisee

Written By: Lindsey Vandenberg | Digital Marketing Specialist | Updated February, 2024

Franchising is a popular business model throughout the United States with 790,000 franchise establishments recorded in 2022, and an increase of approximately 15,000 with 805,000 establishments in 2023. This appealing business structure has produced an economic output of about 827 billion dollars. According to the IFA, franchising accounts for approximately 3% of the US GDP and provided over 18 million jobs last year.

 

As you can see, being a franchise owner continues to stand out when compared to starting your own business from scratch. One of the greatest pros of investing in a franchise is the proven business model and the brand recognition. This makes franchising very attractive to people seeking to change their career paths. However, many people don’t know the difference between franchisor and franchisee and understanding this difference is very important.

The relationship between the franchisor and franchisee

Both parties are responsible for different aspects of the business. The franchisor has carefully analyzed the business they want to turn into a franchise and evaluates the industry to see if franchising the business can be an option. The franchisor is the original business that sells its idea and brand name to franchisees.

Relationship Between Franchisor and Franchisee

Once the business model is proven to be successful, the franchisor reaches out to candidates interested in owning a franchise and carefully selects qualified individuals whose personal and career goals fit into the dynamic of the business. These individuals are the franchisees who will partake in training about the business model, learning how to use certain systems and implement them throughout their business.

What is the role of the franchisor?

The franchisor is an experienced business owner who provides a well-developed business model future franchisees invest in. They act as your “mentor” throughout the process, offering initial in-depth training, resources, and support. The mentor (franchisor) is there for you during your whole journey as a franchise owner, offering guidance and contributing to your business’s overall success.

Common franchisor roles:

  • Franchise expansion: Allows the business to quickly increase their market presence, entering new marketing easily without needing a lot of upfront investments.
  • Formulizing the systems: To achieve ‘Franchise Expansion’, the franchisor must document what does and does not work within the business. These formalized systems will be documented in the FDD (Franchise Disclosure Document) and in the FA (Franchise Agreement).

Common franchisor responsibilities:

The franchisor must have a great understanding of what the business requires to grow successfully. The franchisor’s main responsibilities include supporting the operations of franchisees and continuing to develop and monitor business systems.

  • Offer on-site training and support, especially at the beginning of a new franchise opening.
  • Provide lucrative marketing programs and advertising materials.
  • Ensure the franchisee receives ongoing support with marketing, operations, sales, administration, and more.
  • Provides leadership by setting examples of the type of mentality you want in your business.
  • Communicates new business ideas, resources, tips, and more.

Overall, the franchisor sets standards they expect the franchisee to follow and implement within their business. They must be a mentor and a leader to franchisees, eager to support and motivate each business owner to achieve unit expansion and ultimately dominate the market.

What is the role of the franchisee?

The franchisee is an independent business owner who has invested in a third-party retail outlet called a franchise. They buy the rights to use an existing business’s trademarks and proprietary knowledge to market and sell the brand’s products/services, while upholding standards and systems set by the franchisor.

Franchising has become a common way for individuals to own a business without having to start from scratch. Startups are costly and about two thirds of them never deliver a positive return to investors according to BLS (Bureau of Labor Statistics). This is why the franchising model is so appealing to potential new business owners. The successful business model that comes with a proven track record, in-depth training programs, and expert technical support are the main reasons why individuals turn to franchising rather than starting their own business from the ground up.

Common franchisee responsibilities:

  • Must follow the business model that is already set in place.
  • Grow the franchise with the use of advertising and marketing platforms.
  • Protect the brand name by offering only approved products/services created by the franchisor.
  • Can financially afford the initial investment in addition to other franchising fees (marketing, equipment, employees, etc.).
  • Follows operational practices and procedures.

Own a Franchise with Sam The Concrete Man 

Sam The Concrete Man is the national leader for residential and commercial concrete services. With 30+ years of experience in the concrete industry, we have pioneered a business model that works for each of our 80+ locations across the United States. When you are a part of the franchising family, you are offered endless support and a work/life balance that every business owner strives for. Give back to your community one concrete job at a time.   

Franchise Development VP: Ronnie Musick 

Email: ronnie@samtheconcreteman.com  

Phone: 254-733-1065

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