What to Expect When You Are the Franchisor

While buying a franchise affords numerous advantages over opening a solo business, the benefits to franchisors are even greater. Some things to expect are lessened risk when expanding your business. This is because you have no capital invested in your franchisee's units. You also have increased growth, stronger brand building, and limited contingent liability because as a franchisor you are not signing leases or taking out financing. In addition, you have less liability for the actions of franchisees' employees and events that take place in franchisees' units.

Franchisees often contribute to an advertising fund, which is used to promote the company at the franchisor's discretion. Keep in mind that you will have to hold up to promises you make to franchisees about advertising. Because franchisees are vested in the success of their business, you can expect better performance and structure, as well as count on long-term management instead of high turnover of non-owner managers.

In addition to the advantages, there are legal obligations now required of you. Franchisors are required by the Federal Trade Commission (FTC) to present material information about their company to potential franchisees. This information includes your company's and all of its officers' litigation histories, financial information, and anything material about the company.

Franchisors need to train franchisees how to operate the business and provide very detailed operating manuals. Franchisors generally provide some kind of support as well, from ongoing training to administrative and technical support. Franchisees rely on the franchisor for guidance based on the franchisor's proven system. Franchising is a mutually satisfying and lucrative arrangement if both parties meet their obligations.