What is a Franchisor?
The company that allows an individual (known as the franchisee) to run a location of their business. The franchisor owns the overarching company, trademarks, and products, but gives the right to the franchisee to run the franchise location, in return for an agreed-upon fee. Fast-food companies are often franchised.
What is a Franchisee?
A franchisee is a small business owner that purchases the right to use an existing business's trademarks, associated brands, and other proprietary knowledge. In addition to paying an annual franchising fee to the underlying company, the franchisee must also pay a portion of its profits to the franchisor.
Advantages for the Franchisor
- Strengthening and preservation of there trademark.
- Low investment in the expansion of there business.
- Better operating efficiency in the new units directly operated and supervised by the Franchisees.
- Increase in the coverage and development of markets.
- Charge of an initial fee for the rights to use a trademark which allows them to be reimbursed for the investment made in the development of the franchise system.
- Charge of monthly royalties based on the gross sales of the products and services marketed through the awarded franchises.
Advantages for the Franchisee
- Reduction in the risk by investing in a proven business format.
- Continuous innovation in the technological aspects of the business.
- Continuous support on the part of the Franchisor.
- Documented training based on the Operations Manuals.
- Access to administrative control systems and the technology systems.
- Sense of belonging to a network of Franchisee's.
- Access to promotion and advertising programs.
- Increase in there personal prestige by getting involved in a successful business concept.