What’s the difference between a franchisor and a franchisee?

Alan Wilkinson writes:

I’m often asked to define franchising and this is a good place to start to describe the difference between a franchisor and a franchisee.

A franchise is a relationship where a business that is already successful (the franchisor) enters into a contractual relationship with an individual or business (the franchisee) under the franchisor’s trade name (the brand).

The franchisee operates a clone of this business in their own territory, following the franchisor’s operating procedures (the system) and with the franchisor’s continuing help and guidance in exchange for the payment of fees (an upfront set-up fee or franchise fee and ongoing management fees).

In order to be successful in franchising, this business must already be successful and have a good reputation where it trades, be easily learned by somebody with relevant skills, offer a product or service required in sufficient areas across the UK or globally, produce sufficient profits to share between both the franchisee and franchisor and have a culture of mutual trust and support.

The franchisee is an individual, partnership or business who buys into this concept and uses their own skills and experience with the help and guidance of the franchisor to grow their own successful business.

Alan Wilkinson is head of franchise development at The Franchising Centre and has been in franchising for over 25 years.