Franchisor definition
/What is a Franchisor?
A franchisor is a party that grants the use of its business model, products, and trademarked name to franchisees. The franchisor owns the underlying business model and the legal rights to its trademark and products. The franchisor is paid an up-front fee as well as a percentage of franchisee sales. The franchisor is also responsible for maintaining the quality of the products and services rendered by its franchisees, and manages regional and national advertising on their behalf.
Advantages of Franchising
A franchisor may engage in franchising in order to rapidly build out its business model at a reduced level of investment. Instead, franchisees are supplying capital to start up new franchise locations. Also, franchising can allow a franchisor to rapidly gain market share, especially in new markets where there are few other entrants.
Disadvantages of Franchising
There are some disadvantages to franchising. One is that your franchising model may fail, in which case you will be dealing with a large number of annoyed franchisees who may threaten to sue for a return of their up-front fees. It can also be a distraction, since you will need to run franchisee meetings from time to time, to take input from the franchisees. Some franchisees may also run their operations incorrectly or in a fraudulent manner, so you may need to spend time and money to sue them and shut down their operations.