Understanding the Roles and Responsibilities of the Franchise Relationship
Updated: Oct 15, 2022
If you are considering a franchise as a business opportunity, it is prudent to understand the roles and responsibilities of the franchisor and franchisee prior too engaging such a relationship. Going into a franchise relationship with a clear understanding of who is responsible for what will not only make for a stronger partnership, but also help with the management of expectations.
Franchisor Responsibilities
The “franchisor” is primarily responsible for supporting the operations of the franchisees and continuously developing and monitoring the business systems, products, and services that have led to business success, as determined by the franchisor and disclosed in the franchise system's legal documents.
Franchisor responsibilities include:
Leadership. Lead the franchise system. Provide a clear vision for the brand. Establish a set of core values that support the vision and drive the brand’s mission.
Strategy. Establish and maintain a strategic plan that is designed to achieve the organization’s vision. The strategy should not only establish the plan for growing the brand, but also include a plan for developing the brand's image. All brands must work to stay relevant and achieve performance targets that ensure long-term success.
Franchised Development. Expansion of the business, business systems, trademarks, and trade dress through “franchised expansion” that will occur through recruiting qualified franchisees.
Cost-effective business processes. Franchisors should provide franchisees with systems that support a cost-effective approach toward running the business. the best franchisors will have refined these systems to eliminate inefficiencies and the streamlining of business process for franchisees.
Formalized Systems. Provide formalized and documented systems that have been found to work in the business. These systems and processes include the requirements for startup, training, marketing, and daily operation that contribute to the growth of the business. These formalized systems will be identified in the following legal documents: FDD (Franchise Disclosure Document) and the Franchise Agreement.
Finances. Establish the financial requirements necessary to support the franchise business. These financial requirements will include the initial investment (franchise fees, equipment, supplies, marketing, construction, etc.), cost of necessary professional support (legal, accounting, etc.), costs to operate the franchise business, costs to secure retail space, lease agreement evaluation, marketing, etc.
Marketing. Establishment of the brand and the creation of a brand presence that continually focuses on promoting the brand. This also includes legally protecting the brand through the establishment of trademark.
Market and Territory Development. Strategically identify territories that will be targeted for franchise expansion.
Products and Service Offering. Establish and maintain quality products and services provided by the franchisees. this includes ongoing innovations designed to keep the brand relevant in the market.
Proprietary Products. Identifying and establishing exclusive suppliers who will produce or distribute the system’s “propriety” products to franchisees. Develop and manage vendor relations.
Training. Initial training designed to prepare the franchisee for the responsibilities and roles that are required to successfully open and operate a franchise business.
Real Estate. Offer real estate site selection criteria, demographic data, and architectural design guidance and final approvals.
Construction and Buildout. Offer construction specifications guidance.
Operations. Provide operations manuals, standard operating procedures, and operational accountability audits.
Ongoing Support. Ongoing support includes technical and day-to-day operating advice, and oversight of the operations of the franchise system.
Communication. Regularly communicate the brand’s vision, the direction of the brand, the brand’s vitality.
Franchisee Responsibilities
The “franchisee” is ultimately responsible for the successful launch and operations of their franchise business. This includes many responsibilities, such as adherence to set operating standards, the promotion of the brand locally, and the onboarding of a team capable of representing the brand and executing on the operational expectations of the franchisor.
Franchisee responsibilities include:
Active Involvement. The franchisee is expected to be actively and intimately involved in the franchise business, especially at the start.
Partnering. The national brand be promoted and supported at your franchise business.
Franchise Location Development. Select real estate for the franchise location, cause the creation of architectural plans, facilitate the buildout of the location, hire personnel necessary to open and operate the franchise business, ensure the team is actively engaged in training, market brand, successfully open the franchise business.
Employee Training. Ensure every person working in the franchise business is adequately trained, competent, licensed, certified, and prepared well enough to be held accountable for following the set operating procedures and able to work within the system’s standards.
Brand Building. Actively market and promote the national brand.
Standards Accountability. Maintain the brand’s operating and marketing standards. Ensure the methods, procedures, techniques, and practices outlined by the franchisor are executed upon and maintained at the level expected. Ensure compliance.
Leadership. Lead and maintain a culture of excellence and complete alignment to the brand’s core values and mission. Develop a working environment and mentality in your team and business that supports the vision of the brand and the attainment of set performance standards.
Communication. Transparent and active communication that will ensure the maintenance of brand standards with customers and team members. Ensure all involved are prepared to meet the expectations set forth and able to confidently drive the brand toward the shared vision. Ensure customers view the brand as credible, trustworthy, and competent.
System Alignment. Follow the standards, methods, procedures, techniques, and practices outlined by the franchisor.
Royalties. Submit royalty fees for the right to utilize the franchisor's systems.
Finances. Account and administer the financial aspects of the business.
Marketing. Promote and market the franchise location locally.
Continuous Growth. Learn the system inside and out. Invest the time necessary by working hands-on in the business to develop a complete understanding of the business.
Cooperation. Work in partnership with the franchisor and franchise system. Engage in effective, two-way communication.
Area Representative Responsibilities
The “Area Representative” is ultimately responsible for taking on a quasi-franchisor role within their agreed upon market. They support the successful launch and operations of the franchise business within their designated territory. This includes many responsibilities, such as real estate site selection compliance, ensuring the franchisees within their territory adhere to the operating standards established by the franchisor, the promotion of the brand locally, and the onboarding of team members capable of representing and executing on the operational expectations of the franchise brand.
Area Representative responsibilities include:
Leadership. Regional leadership of the franchise system within the Area Representative's designated territory. Communicate the Franchisor’s vision for the brand. Ensure the brand’s core values are reflected within the region.
Franchise Development. Ensure the agreed upon expansion of the territory is actively managed and met. Recruit qualified franchisees within the territory.
Marketing. Establish a marketing cooperative within the territory when deemed necessary. Ensure territory marketing is in line with brand standards and compliant.
Managing the Territory. Strategically identify local markets that will be targeted for franchise expansion.
Standards Accountability. Maintain the brand’s operating and marketing standards within the designated territory. Ensure the methods, procedures, techniques, and practices outlined by the franchisor are executed upon and maintained at the level expected. Ensure compliance.
Training. Initial training designed to prepare the franchisees within the territory for the responsibilities and roles that are required to successfully open and operate a franchise business.
Real Estate. Offer real estate site selection guidance, demographic data analysis guidance, and architectural design guidance.
Construction. Offer construction guidance.
Ongoing Support. Ongoing support includes technical and day-to-day operating advice, and oversight of the region.
Communication. Regularly communicate with the territory franchisees regarding the brand’s vision, operating standards, marketing, brand reputation, etc.
Vendor Relations. Develop and manage vendor relations locally.
Randy Stepp is a Principal with Renaissance Leadership Group. RLG is a full-service business and franchise development company whose purpose is to help business owners realize their dreams of independence and freedom.
Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more about business development
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