Franchise, Franchisor and Franchisee
Summary
TLDRThis video script explains the dynamics of franchising, distinguishing between franchisors and franchisees. Franchisors, like McDonald's, create a successful business model and allow franchisees to use it by paying an initial fee and sharing profits. The franchisor controls product range, outlet appearance, and staff uniforms, while franchisees manage staff training, recruitment, and inventory. The script uses McDonald's as a prime example to illustrate how franchising operates.
Takeaways
- π Franchisor is the creator of a franchise (e.g., McDonald's) and grants permission for the franchisee to use the business model.
- πΌ Franchisee is the person or company that pays to join the franchise and operates under its brand.
- π° Franchisee pays an initial fee and shares profits with the franchisor in exchange for using the franchise model.
- π Franchisor controls key elements like product range (e.g., Big Mac), store layout, and uniform design.
- π Franchisor maintains control over the branding and appearance to ensure uniformity across all franchise outlets.
- π¨βπΌ Franchisee is responsible for staff recruitment, training, and stock management in their franchise location.
- π Franchisee controls how they train their staff but must adhere to franchise standards.
- π¦ Stock control falls on the franchisee, who must manage inventory based on local demand.
- π’ Franchises like McDonald's ensure that all branches maintain a similar look and operational flow.
- πΌ The division of responsibilities is clear: franchisor controls branding and core operations, while the franchisee manages local execution.
Q & A
What is the role of a franchisor in a franchise business model?
-A franchisor is the creator of a franchise, such as McDonald's, who provides a successful business formula for the franchisee to use in exchange for an initial fee and a percentage of profits.
What is the difference between a franchisor and a franchisee?
-A franchisor is the owner of the franchise concept, while a franchisee is the individual or company that pays to operate a business under the franchisor's brand and system.
What are the initial costs a franchisee must pay to a franchisor?
-A franchisee must pay an initial fee to the franchisor to gain the rights to operate the franchised business.
How does a franchisee compensate a franchisor after the initial fee?
-After the initial fee, a franchisee compensates the franchisor by giving a percentage of their profits.
What aspects of the business does a franchisor typically control?
-A franchisor typically controls the product range, the interior design of the outlets, staff uniforms, and the overall brand image.
What are the responsibilities of a franchisee in terms of operations?
-A franchisee is responsible for staff training, recruitment, store operations, and ensuring adequate stock to meet anticipated local demand.
Why do franchisors require franchisees to adhere to a specific format for their outlets?
-Franchisors require a specific format to maintain brand consistency and recognition across all franchised locations.
What is the significance of staff uniforms in a franchise like McDonald's?
-Staff uniforms in a franchise like McDonald's are significant for maintaining brand identity and presenting a unified image to customers.
How does the franchisor's control of the product range affect the franchisee?
-The franchisor's control of the product range ensures consistency in product quality and customer experience, which can impact the franchisee's operations and sales.
What are the benefits for a franchisee in joining an established franchise like McDonald's?
-Joining an established franchise like McDonald's provides a franchisee with a proven business model, brand recognition, and support from the franchisor.
How does the franchisor's control over the franchise system benefit the franchisee?
-The franchisor's control ensures that the franchisee receives ongoing support, training, and access to the franchisor's marketing and operational expertise.
Outlines
π€ Understanding the Franchise Terminology
This paragraph clarifies the difference between the terms 'franchisor,' 'franchisee,' and 'franchise.' A franchisor is the creator of a franchise, such as McDonald's, who allows a franchisee (another party) to use their successful business formula in exchange for an initial fee and a portion of the profits. The franchisee is the person or company that pays to become part of the franchise. The paragraph explains the relationship between the franchisor and franchisee and highlights that the franchisor provides the business model while the franchisee pays fees and shares profits.
π’ Franchisor Controls: Product and Branding
This section focuses on the aspects controlled by the franchisor within the franchise model. The franchisor dictates the product range (like the specific menu items at McDonald's), the interior design of the outlets (ensuring a consistent look across all locations), and the staff uniforms. These elements ensure a standardized brand experience for customers across different franchise locations.
π₯ Franchisee Responsibilities: Staff and Operations
This part explains the responsibilities of the franchisee in managing their franchise. The franchisee is in charge of training the staff for their specific branch, recruiting suitable employees, and maintaining appropriate stock levels based on local demand. These responsibilities highlight the operational control the franchisee holds within the broader framework set by the franchisor.
Mindmap
Keywords
π‘Franchise
π‘Franchisor
π‘Franchisee
π‘Initial fee
π‘Profit sharing
π‘Product range
π‘Staff recruitment
π‘Training
π‘Stock control
π‘Uniform
Highlights
Definition of a franchisor: the creator of a franchise who provides a successful business formula.
Definition of a franchisee: the person or company who pays to become part of a franchise.
Franchisee pays an initial fee to the franchisor for the right to use the business formula.
Franchisee agrees to give a percentage of profits to the franchisor.
Franchisee operates with the franchisor's control over the product range.
Franchisee benefits from the franchisor's established brand and marketing.
Franchisee receives training and support from the franchisor.
Franchisee is responsible for staff recruitment and training at their location.
Franchisee manages inventory and supply chain for their franchise.
Franchisee has control over local marketing and promotions.
Franchisee operates under the franchisor's guidelines for quality and service.
Franchisee benefits from the franchisor's established systems and processes.
Franchisee has the freedom to operate their own business within the franchise framework.
Franchisee is part of a larger network, which can lead to economies of scale.
Franchisee can leverage the franchisor's reputation and customer loyalty.
Franchisee has access to the franchisor's research and development for new products.
Franchisee operates with the franchisor's control over the outlet's interior design.
Franchisee is expected to maintain uniformity in staff uniforms and branding.
Franchisee's success is tied to the franchisor's ongoing support and the franchise system's effectiveness.
Transcripts
franchise franchise or franchisee there
the three words all sound the same let's
clear it up
okay franchisor so they are the creator
of a franchise a franchise such as
McDonald's who enables the franchisee
note to easy bread to use the successful
business formula in exchange for an
initial fee and a cut of the profits
whilst the franchisee is the person or
company who has paid to become part of
the franchise let's look at how it works
so you're the franchisor they've got the
idea they will give the franchisee the
idea so that's why you can think of
franchisee like employee pencil bees and
bread that's a way to think about it and
then in exchange for giving the idea the
franchisee will firstly pay an initial
fee to the franchisor and then when the
franchisee is making profits with the
franchise such as McDonald's then they
will give a split a cut of the profits
to the franchisor the key is who
controls what when you have a franchisee
so the franchisor will control the
product range think about those the prop
range of add-ons we know it it's like
your chicken sandwich your Big Mac etc
the interior of the outlet many
McDonald's for example they all look for
the same indoors and they've all got the
same format for their dry fruit and even
behind the scenes if you've worked up
Donald's they will all be laid out very
similar and then a free staff uniform
Figg McDonald's all the staff are
wearing the same uniform with their name
and their badge with the beginning the
franchisee so the employee franchisee so
number one spot training very control of
training their staff up who work for
their branch of the franchise number two
staff recruitment so they're in control
of who they select to work for them
and number three stop control so they
are it's their responsibility and then
they're in control of getting the
correct amount of stocking for the
anticipated demand that they will have
in their franchise perhaps in the local
area remember example the franchise is
McDonald's
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