You have franchised your business, your FDD is prepared and you are ready to start selling franchises. Now you are a “franchisor” but what does it really mean to become a franchisor? There are couple of answers to this question one answer is a technical legal answer and one answer is a more entrepreneurial answer. Let’s explore both.
Becoming a franchisor means that you have satisfied federal and state specific franchise laws through a compliant Franchise Disclosure Document that contains audited financial statements and updated information about your franchise system and franchise offering. As a franchisor you are offering and selling to others (your prospective franchisees) the license and right to establish a franchised location that will be operated in accordance with the systems and standards that you have specified. Some legal characteristics of your franchisor status, include:
From an entrepreneurial standpoint becoming a franchisor is all about creating and building relationships with your franchisee partners and, together, expand and grow your brand in ways that you could not achieve by yourself. As a franchisor you are accepting a leadership role and a role of responsibility where your franchisee partners put their trust and faith in you and, likewise you put your trust in faith in them. Becoming a successful franchisor means creating a win-win relationship with your franchisee partners and by firmly leading in a direction that insists on operational consistency and brand integrity. Some entrepreneurial characteristics of your franchisor status, include:
As a franchisor the rights and obligations between you and your franchisees will be governed by your franchise agreement. Your franchise agreement will be prepared by your franchise lawyer as part of the overall development of your Franchise Disclosure Document (“FDD”). The rights that will be granted to you, among others, will include:
So, when you become a franchisor it is not all about just receiving fees. You will possess an obligation to support your franchisees, protect your trademarks and provide advertising and administrative guidance. That is, you must set the pace for your franchise system by monitoring franchisee performance, ensuring that franchisees have a reliable and fairly priced chain of supply, development and refine your business systems, improve product and/or service standards, review franchisee advertising programs and development advertising programs that may be implemented by franchisees.
No, there is much more to franchising. As a start-up or emerging franchisor, it is critical to understand that franchising your business is very much a process where you will work toward the continued improvement of your business and business systems and the continued expansion of your brand.
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