Franchising, a concept that originated in the United States, has paved the way for brands to rapidly expand their network. This growth is fueled by investors who embrace the brand and business model of the franchisor. The concept initially gained prominence in France, making it the first European country to adopt this innovative system. Today, franchising is an ever-evolving and increasingly popular business model, particularly in the realms of retail and fast food.
Understanding the Franchisor: Definition and Core Principles
A franchisor is the heart and soul of a brand that has meticulously crafted and documented its identity. This includes a graphic charter, communication strategy, customer experience concept, product and service offerings, and everything needed to empower franchisees to launch and grow their businesses.
The franchisor ensures that franchisees have access to a fully developed concept; which includes store design (if applicable), supplier partnerships, pricing policies, IT systems, management models, comprehensive training, and ongoing support.
By definition, a franchisor has validated the viability of its concept by successfully operating its own outlets before embarking on franchise expansion. The concept is documented meticulously, enabling franchisees to seamlessly implement it.
Franchising exists in two main styles: “hard” and “soft” franchises.
Hard Franchise: This model offers a concept that is highly detailed and leaves little room for adaptation by franchisees. Consequently, franchisors must provide substantial support to their franchisees to ensure consistency and success.
Soft Franchise: In this style, the brand and concept are defined but allow more flexibility and adaptability. This flexibility empowers franchisees to make adjustments to their businesses and possibly provide additional services.
The Franchisor-Franchisee Relationship
The relationship between the franchisor and franchisee is built on three foundational principles: independence, shared responsibility, and loyalty.
e: The franchisor-franchisee relationship is governed by the principle of independence. These are two distinct entities with complete management freedom. Any interference in each other’s management is strictly prohibited, a principle strictly monitored by the law. However, in some cases, the franchisor may be a majority or minority shareholder in the franchisee’s business. This intricate situation requires careful handling.
Loyalty: Loyalty is another key principle in this relationship. The franchisor commits to providing all necessary means to support their franchisees, ensuring fair treatment across the network. The franchisee, in turn, respects the brand’s established guidelines, from communication and pricing to service quality. The notion of loyalty is essential, as it’s the only principle that can potentially disrupt the independence of the parties. The franchisor may intervene in the franchisee’s operations if the latter deviates significantly from the brand’s DNA. Likewise, franchisees can challenge the franchisor if they breach contractual obligations.
Sharing: If the franchisor refuses to include franchisees (who have field experience) in the development of the brand, why did it choose the franchise system to develop? In the same way, if the franchisee is only there to take what their franchisor offers them without investing at all in the development of the brand and its network, as much as they create their own brand; they will do it how they want.
The franchisor/franchisee relationship must be a winning relationship for both parties. This is why Raison Home cherishes and applies family values, which embodies sharing, collective intelligence and collaboration.
In addition to these principles, the relationship involves financial aspects. The franchisee pays an entry fee to acquire the right to use the brand within a specific territory for a specific period. Royalties are also paid to the franchisor, which funds the operational aspects of the franchisor’s business and central marketing activities.
Roles and Responsibilities of the Franchisor
A successful franchisor wears multiple hats to support the franchisee network in various business aspects:
- Creating a well-defined brand that encompasses logo, graphic standards, store design, and customer experience concepts.
- Continuous adaptation of the brand to changing market realities, involving franchisees’ input due to their on-ground experience.
- Providing clear and equitable legal frameworks to govern the relationship with franchisees.
- Offering efficient tools and ongoing support, allowing franchisees to focus on customer satisfaction, improve the customer experience, and simplify business management.
Choosing the Right Franchisor
Selecting the right franchisor is a crucial decision that can shape your entrepreneurial journey. To make an informed choice:
- Identify Your Sector: Decide whether you have a passion based on your training/experience or have an affinity for something entirely different that can offer unforeseen possibilities.
- Analyse the Sector: Assess the sector’s potential through a SWOT analysis, projecting into the future to gauge strengths, weaknesses, opportunities, and threats.
- Evaluate Franchisors: Analyse franchisors based on their performance and trend records over a substantial number of years.
- Consider Financial Capacity: Match your financial risk tolerance with the franchisors’ requirements and potential return on investment.
- Qualitative Assessment: Examine qualitative criteria such as innovation investments, training quality, alignment of values, and personal compatibility with the franchisor’s team.
- People Factor: Your experience in entrepreneurship should be a happy one, so evaluate how well you get along with the people you meet within the franchisor’s organisation.
The British Franchise Association (BFA)
The BFA is a significant player in the world of franchising, striving to promote best practices aligned with evolving legal frameworks and market dynamics. It plays a pivotal role at both national and international levels in supporting the growth and development of franchisors and franchisees.
The BFA empowers individuals within the franchising industry to make positive contributions to their surroundings, fostering an environment of shared success and collaboration.