Franchise Responsibilities: Franchisor's Vs. Franchisee's
If you are considering buying into a franchise or allowing someone to open a branch
of your preexisting franchise, you will need to know the details of the franchisor-franchisee relationship. This relationship is a business arrangement governed by contract agreement under which both parties have specific rights and responsibilities.The Difference between a Franchisor and a Franchisee
The key differences between a franchisor and a franchisee are rights and ownership. A franchisor, as the owner of the original franchise, owns the operating system and all trademarks of the franchise. The franchisor can then allow those trademarks to be used by another through a contract.
A franchisee can purchase the rights to use the franchisor's operating system and trademarks. The franchisee may continue to use said rights so long as the terms and conditions set forth in the franchise agreement are not violated.
Responsibilities of Franchisors vs. Franchisees
Though the franchisor-franchisee relationship is often referred to as a "parent-child" relationship, this analogy is generalized and can be misleading. While it is true that a franchisor must teach a franchisee how to operate according to the system and within set rules, to give the impression that franchisees are children is misleading at best.
Franchisees are independent business owners, responsible for the success or failure of their own business. Unless otherwise stated in the franchise agreement, franchisees are individually responsible for:
- How well the franchisor's business model is executed;
- Whom they chose to hire;
- How much their employees are paid;
- How employees are scheduled; and
- What prices they charge for the product or service, etc.
A franchisor can give advice in these areas, but it is generally not considered the franchisor's responsibility. Because it is in the best interest of the franchisor that the franchisee succeeds, he or she can help the franchisee through appropriate training and tools. In the end, however, the success of the business will always be up to the franchisee.
The Legal Work of Franchising
If you are considering entering into a franchisor-franchisee relationship in any capacity, it will be in your best interest to contact an experienced business lawyer. The right business lawyer will be able to ensure that the franchise contract is completely fair and beneficial to you.
As the franchisee or franchisor, you will want to have your business attorney read over the contract, offering a professional eye. As a franchisor, your business lawyer can help you draft the contract that will uphold your original franchise image and operating system in the franchisee's new business.
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