Running a franchise comes with clear obligations to ensure the business operates successfully and the brand maintains its reputation. In short, you can sum up your role in three words: follow the system.

Brian Duckett, former chairman of The Franchising Centre, explains: “The franchisor is responsible for developing the business system, creating the brand and defining the standards to which various things should be done. The franchisee is responsible for operating that system.”

This means maintaining standards in all areas – from delivery of products or services to accurate reporting of relevant activities. Franchisees must:

● protect the brand

● ensure staff act in line with the system

● spend the majority of their time working on the business

● use their best endeavours to make it grow

Duckett adds: “What they are not responsible for is deciding what will be sold, how it will be marketed and what colours and designs to use.  These are all decided by the franchisor and are part of the system which the franchisee is responsible for operating.”

Practical responsibilities

Shelley Nadler, legal director at Bird & Bird, outlines practical responsibilities: “A franchisee will be responsible for obtaining funding for and setting up their business in accordance with the franchisor’s requirements.

“They will need to pay an initial franchise fee, as well as any additional costs necessary for getting the business up and running, such as equipment and fit-out costs of premises.”

Franchisees are also responsible for recruiting staff (with guidance from the franchisor), undergoing initial training, implementing the system day-to-day and carrying out local marketing to attract customers.

Nadler adds: “A franchisee’s full obligations will be set out in the franchise agreement, which should be reviewed before an investment is made.”

Louise Harris, principal at Franchise Projects, highlights another key point: “Above all, [...] the obligations on a franchisee are to engage with the franchisor in a professional manner and together drive the business. This means talking through challenges, disclosing concerns or niggles and giving positive feedback too.”

How will a franchisor measure my compliance?

Franchisors monitor compliance by requiring management and financial information and conducting regular visits.

John Pratt, senior partner at specialist law firm Hamilton Pratt, notes: “If a franchisee is not compliant, they can expect a formal notice from the franchisor to improve. This is not ‘Big Brother’ at work, but a sensible way to operate a franchise network.”

What are a franchisor’s obligations to franchisees?

Just as franchisees have responsibilities, franchisors also have duties. John Pratt explains: “The obligations of a franchisor are set out in the franchise agreement.

“Usually these obligations are set out in two separate clauses. The initial obligations are those that are required to allow a franchisee to start operating the franchise business. This includes the provision of initial training, initial stock and advice on how to launch the business.

“There are also the continuing obligations, which apply during the term of the franchise. This includes providing assistance and guidance to franchisees, developing the franchise and providing continuing training.”

Pratt adds that these obligations should be clear enough to enforce. “When a franchisor is required to provide advice, the agreement should set out what that means. Is it two days of face-to-face meetings or a five-minute phone call?”

Recent cases suggest franchisors may also owe a duty of care and good faith to franchisees, requiring honesty, full communication and operating the franchise in a way that isn’t prejudicial to franchisees.

How is a dispute between a franchisor and franchisee resolved?

Even when both parties follow the rules, disputes can arise. Shelley Nadler outlines the process: “The first thing a franchisor and franchisee in a dispute situation should do is have a face-to-face meeting to see if they can find a solution that will satisfy both parties.”

If this doesn’t resolve the issue, the franchise agreement usually specifies mediation before litigation. Nadler explains: “Mediation is where an independent mediator encourages the parties to resolve the dispute themselves through discussions in order to seek a compromise. Mediation is confidential, quicker and less costly than going to court.”

If mediation fails, the dispute may go to arbitration or the courts, with lawyers instructed as needed. “Arbitration is similar to litigation. There is an individual who acts as an arbitrator to decide the issues and makes a decision that will be binding on the parties,” Nadler adds.

Conclusion

Understanding your responsibilities as a franchisee and the franchisor’s own obligations provides a strong foundation for success.

If disputes arise, structured processes such as mediation and arbitration can help resolve issues. Clear responsibilities and open communication allow franchisees and franchisors to build a strong, sustainable and profitable franchise network