When franchisees are successful, much, if not most, of their success can be attributed to their willingness and ability to work in lockstep with franchisors. Investing in a franchise opportunity allows franchisees to purchase the right to use an established system dedicated to reproducing the franchise’s proven model. It is an arrangement that may not be suitable for everyone, but others thrive.
As part of this symbiotic business relationship, both parties depend upon the other to build a successful business. While each franchisee typically brings their own strengths into the arrangement, it is crucial that they understand what is expected of them, especially the responsibilities and duties that are required to uphold the brand’s standards.
Franchisor responsibilities
Before we get to the primary duties and responsibilities for franchisees, here is what you can expect to receive from this relationship. Franchisors try to grow their businesses by opening successful franchises in as many places as possible. Their bottom line increases by adding new locations and carefully selecting franchisees they believe will succeed. Most franchisors are also dedicated to helping franchisees succeed for the benefit of everyone involved. In general terms, franchisor responsibilities include:
- National advertising and marketing
- Initial and ongoing training for franchisees and their employees
- Regular evaluations
- Researching, developing and managing new products and services
- Managing territories to ensure franchisees are successful without infringing upon other franchisee locations
- Providing advice to franchisees whenever requested
- Providing multiple franchise opportunities to successful franchisees
- Recommendations for vendors to buy products from and negotiating bulk deals
- Providing site selection assistance
- Providing operational support
In some cases, franchisors provide financing or help franchisees secure loans, while others may help franchisees find a location and negotiate lease deals. However, as we will detail later, it is crucial to work with an experienced franchise law attorney to review all contracts and agreements before signing any paperwork or transferring any funds.
Franchisee responsibilities
When franchisees operate successful businesses, they add value to the brand and help other franchisees succeed. Customers who receive excellent service and products from a franchisee in one location will likely visit the same brand in a different area. This reputation is largely earned by the franchisee’s ability to adhere to proven practices and procedures. As such, franchisees are typically responsible for:
- Financing the purchase of the franchise
- Paying the franchise fee and ongoing fees and royalties
- Adopting the franchisor’s rules, operational guidelines and expectations for running the business
- Finding a location, leasing and adapting the space for the franchise
- Properly hiring and training employees
It is essential to note that franchisors usually provide training materials for all employees, and many even offer training for mid and senior-level workers. Each franchise agreement is unique, so it is crucial that you understand the terms to know what to expect. In most cases, clear franchise agreements help both parties build a stronger brand.
Telltale signs that you fit into this structured partnership
There is no doubt you have your own reasons for considering a franchise. If your goal has always been to be your own boss, there are three basic options: Purchase a franchise, build a business from scratch, or buy an existing business. When looking at the nature of a franchisor-franchisee relationship, here are some traits that will likely help you succeed:
You are a team player and believe that collaboration makes everyone stronger. Many of the 750,000 plus franchise opportunities in the United States offer detailed and proven models of success. While it is not a sin to be a lone wolf in other situations, operating a franchise according to your own standards is generally discouraged.
You work best with structured environments. Franchises provide rigid business models and procedures that everyone is expected to follow. Franchise agreements outline what is required of you, and they are a roadmap to success for many franchisees. If you want to pursue your own path, franchising is likely not going to be a good fit.
You have patience and are not deterred by working long hours. While franchise opportunities contain many readymade perks for support and training, starting any new business requires a considerable investment of your time and energy. If you are considering a franchise as a way to “ease” into retirement, you may want to take a step back and determine whether you are willing to put in the time. Likewise, you should understand that many challenges lie ahead so make sure you can stick to the plan when bumps in the road appear.
You are a good listener and are able to accept criticism and advice. When we toil away working for someone else, most of us have had bosses and companies that offer little, if any, feedback, good or bad. But being a franchisee means you will likely receive evaluations from franchisors which are intended to help you succeed. You should accept this in the spirit that it is intended. You also need to provide clear instructions to your employees on successfully delivering the brand’s products and services. But you should also listen to their concerns.
You are willing and able to enforce the franchise’s brand. Customers keep coming back to franchise businesses because they consistently meet or exceed their expectations. Regardless of the service or product you provide, you will be the driving force for seeing that the business and its employees continue to meet consumer expectations and demands.
You excel within a supportive infrastructure. Whether in your personal life or your career, you likely already know that you need a robust support system to succeed. Franchises thrive primarily from being able to replicate successful business models in dozens, hundreds or thousands of locations. Franchisors already understand that you will be an integral part of growing their brand. Being a prosperous franchisee means understanding how to utilize the support system and implementing sound strategies used elsewhere.
Do not overlook the legal aspects of becoming a franchisee
Regardless of where you are in the process, you have already probably surmised that becoming a franchisee involves a mountain of paperwork, requiring legal guidance. However, it is vital to work with a lawyer who focuses on franchise law. Attorneys with decades of experience guiding potential franchisees understand how to protect your interests by thoroughly reviewing documents and negotiating, when appropriate, on your behalf.
The process is complex, and franchise-related documents include the franchise disclosure document (FDD), which is often over 200 pages long. The FDD contains crucial information that the franchisor is required to disclose. Our review also includes the franchise agreement, which outlines the requirements with which you must comply. In most cases, these are non-negotiable, but we have the experience to identify potential risks and negotiate when necessary.
We provide sophisticated reviews of software licensing agreements, area development contracts, personal guaranties and nondisclosure or confidentiality agreements. We also carefully evaluate commercial leases for our brick and mortar franchise clients. Our lawyers also check the trademarks of the franchisor, ensuring they are federally registered. This is crucial to avoid infringement claims against you.
As part of our review process, we will discuss the franchisor’s litigation history and key people involved and whether any bankruptcies have been disclosed, as well as reviewing the franchise agreement (your contract with the franchisor) in detail with you. Investing in a franchise is a life-changing experience. Our mission is to safeguard your future by flagging potential liabilities and helping you avoid unnecessary economic losses.
