They pay a franchise fee and then have a licence to trade under your name. They provide the investment, their time, skills and work ethic while you deliver them a franchise package, training and ongoing support.
In addition to their initial investment, they have to pay you a management service fee, also known as royalty payments, which is a fixed amount you set in the franchise agreement or a percentage of the monthly turnover.
It’s important to remember that their success equates to your success, so while you’re not running the day-to-day business any more, it’s up to you and your head office team to support and nurture the franchise teams. This means using part of your management service fee to provide training, employ support managers, develop your service offering and market your company nationally to attract customers to your franchises.
As franchisor, you also have a certain amount of control over the businesses operating under you. You have ultimate authority over how the franchisee runs the unit, for example, they can’t start selling new products or services without your say so. They can’t start creating their own processes or changing the logo. They have to work very much within the parameters that you’ve laid out in the franchise agreement.
If you’re not happy with one of your franchisees and believe they are in breach of their contract, you can make moves to replace them. You can even decide if the franchisee gets to renew their licence with you once the franchise period has elapsed. In this case, you can resell the franchise to a new franchisee.
