Franchise Owner Responsibilities
In many ways, the owner of a franchise has responsibilities identical to those of any other small-business owner. The major difference is that the franchise owner is required to maintain the quality and service standards established by the franchisor. A poorly performing franchise that does not meet customer expectations can damage the company's brand image and hurt other franchisees in the network. The advantage of buying a franchise versus starting your own company is that you will have a recognized brand name -- and a customer base -- from day one, and you can take advantage of the franchisor's turnkey system to operating a successful business. The franchisor has already created the business model for you to follow.
Most franchises offer products or services directly to the public. The owner of a franchise business will most likely deal with customers on a daily basis. This interaction may involve addressing and resolving customer complaints. Customers can be demanding and even rude. Not all businesspeople have the personality or patience to play this customer service role effectively. One of the decisions a prospective franchise owner has to make is whether he wants to spend a significant amount of his work day trying to make customers happy.
The franchise agreement spells out many different rules the franchisee must follow. These may include pricing, hours of operation, acceptable signage, employee uniforms and even accounting procedures. In carrying out these responsibilities, the franchise owner may feel constrained -- she doesn't have the flexibility to operate the business as she would like. Staff members from the franchisor may make periodic visits to the franchisee's business to evaluate how well she is following the rules and regulations. This evaluation process may be uncomfortable for a person whose objective for going into business was freedom from having to report to a "boss."
It is the franchise owner's responsibility to make sure every person working in the company follows the franchisor's rules as well. The franchise owner must be an effective trainer and motivator. The franchisor usually provides initial training for new franchisees, who take the lessons back to their individual businesses and incorporate them into training exercises for employees. The franchise owner may be required to attend additional training sessions at the franchisor's headquarters to learn new systems or procedures or about new products being introduced.
The franchise owner typically pays a royalty fee to the franchisor, usually a percentage of monthly revenue. The franchise owner is responsible for timely and accurate accounting of revenues earned and making the royalty payments on time as spelled out in the franchise agreement.
Although the franchisor may initiate its own advertising campaign to generate customers for all the franchisees, the individual franchise owner is still responsible for creating his own local marketing campaign. He must allocate budgetary dollars to the campaign and select marketing strategies and tactics that are successful in bringing in new customers. Franchisees with a flair for marketing have a chance of achieving greater success than those who rely completely on the franchisor's marketing efforts.
A prospective franchise owner must have access to start-up capital just like anyone who wants to open a business. Although the franchisor provides guidance regarding the start-up and ongoing costs of the business, the franchise owner must accurately forecast how much capital is required to not only build and outfit the facility, but pay for operating expenses until the business reaches positive cash flow.