Franchise, Franchisor and Franchisee

Summary

This 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

• 📝 Franchisor is the creator of a franchise (e.g., McDonald's) and grants permission for the franchisee to use the business model.
• 💼 Franchisee is the person or company that pays to join the franchise and operates under its brand.
• 💰 Franchisee pays an initial fee and shares profits with the franchisor in exchange for using the franchise model.
• 🍔 Franchisor controls key elements like product range (e.g., Big Mac), store layout, and uniform design.
• 📋 Franchisor maintains control over the branding and appearance to ensure uniformity across all franchise outlets.
• 👨‍💼 Franchisee is responsible for staff recruitment, training, and stock management in their franchise location.
• 🎓 Franchisee controls how they train their staff but must adhere to franchise standards.
• 📦 Stock control falls on the franchisee, who must manage inventory based on local demand.
• 🏢 Franchises like McDonald's ensure that all branches maintain a similar look and operational flow.
• 💼 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.