Who’s in charge when you own a franchise?

If you’re thinking about investing in a new franchise opportunity, it’s important to understand what being a franchisee actually means.

Far from simply taking a job, owning a franchise involves a combination of independence, responsibility and adherence to a proven system.

Here, leading experts in franchising explain the key elements you should consider before making the leap…

Am I just an employee of the franchisor?

Many people mistakenly assume that buying a franchise is like buying a job. Brian Duckett, former chairman of The Franchising Centre, clarifies: “You will be taking on the responsibility for running, including funding, your own outlet, and you may well have to secure the venture by offering your house as security for any borrowing.”

Franchisees are responsible for employing staff and running the business day-to-day, even though they follow the franchisor’s system.

“Franchisees typically work much harder and for much longer than most employees. However, they have the incentive of being a business owner who, if everything goes according to plan, can sell their outlet for a reasonable capital gain,” Duckett adds.

John Pratt, senior partner at Hamilton Pratt, reinforces this point: “It’s a fundamental principle of franchising that franchisees operate their own businesses.

“Franchises are not a branch or subsidiary of the franchisor’s business, but a wholly independent business that operates subject to the restrictions and obligations contained in a franchise agreement and operations manual.”

Who is in control of the business?

Franchisees often ask whether they are fully in control of their business. According to Brian Duckett: “Assuming you’ll be the majority shareholder and will take day-to-day responsibility for the operation of the business, you will be most definitely in control.

“However, the purpose of that business will be to operate, under licence, an outlet of the franchisor’s system.”

Franchisees must follow the franchisor’s operations manual and maintain standards, but they still have room to make decisions: “It’s not about being a robot. You’ll have the opportunity to decide, for example, which of the franchisor’s marketing and sales methods you use and how often you use them.”

John Pratt adds: “The whole point of franchising is that the franchisor has established a system it knows works and, therefore, the combination of the franchise agreement and operations manual ensures franchisees have to comply with the system.

“Having said that, the franchisor’s system will not cover all aspects of the business, so franchisees do have flexibility in how they manage and operate their business.

“The important point to remember, in relation to franchising, is that the business is yours – it is not the franchisor’s. Franchisees generally make all business decisions, subject to any restrictions that may be found in the franchise agreement or manual.”

“Where franchisors provide assistance, it’s not necessary to comply with it, although it might be foolish to fail to do so.”

What is my legal status as a franchisee?

Legally, franchisees are independent business people, not employees. Shelley Nadler, legal director at Bird & Bird, explains: “As a franchisee, your status is that of an independent business person entering into a contractual relationship with a franchisor for the right to carry on a business format franchise for a period of time.”

Nadler stresses that as a franchisee, you don’t acquire ownership of rights in the brand name or franchise system, but are permitted to use these rights during the term of the franchise agreement.

Franchisees are protected under general contract law and sale of goods legislation, but they do not enjoy the protections given to employees or consumers.

Conclusion

Owning a franchise is a unique business model that combines independence with structured support. Franchisees are not employees, but they operate under rules designed to maintain consistency and protect the brand.

Success depends largely on your effort, management skills and ability to follow the franchisor’s proven system.

As John Pratt summarises: “While they don’t have complete control, a franchisee’s business is the franchisee’s and not the franchisor’s. That means how well franchisees do in their business will depend, to a large extent, on their efforts and abilities.”