While the parent-child analogy is often used to describe the relationship between a franchisor and franchisee, Patrizio Nebuloni, development manager of South African fast food chain Sandwich Baron, argues that this is not the case because the relationship is a legal and practical business one.
Nebuloni explains that a franchise is first and foremost a business relationship between the franchisor and a franchisee, which is governed by a franchise agreement. “The franchisor owns the blueprint, the trademark and the operating system for the franchise. The franchisee is permitted to use both according to the terms and conditions set out in the franchise agreement. Additionally, the franchisor and franchisee must fulfil their responsibilities under the terms and conditions of this agreement.”
He says the role of the franchisor is to facilitate, teach and train the franchisee on how to operate according to the system, to manage the business’s growth. “Franchisees, on the other hand, have made a strategic business decision to purchase the franchise and have voluntarily agreed to operate the business according to the rules and boundaries set forth by the franchisor. They are responsible for the activities of the business, as well as its success or failure.
“Potential franchisees are provided with all the needed information about the franchise in the contractual disclosure document, prior to making the decision to become a franchisee. They are afforded ample opportunity to review these documents and are encouraged to seek professional (legal, financial, etc) opinions regarding both the viability of the business concept and the terms of the contract,” Nebuloni states. “Should the investigation of the opportunity lead them to believe that it is not the right franchise or business for them, they are free to look at other opportunities. If they choose to buy into the franchise and become a franchisee and later decide that it was the wrong decision, most franchisors would allow them to sell their business to an approved buyer, and in some cases assist with the sale. This verifies again that the parent-child analogy cannot apply, as the relationship can be ended amicably, with no business ties remaining thereafter.”
Franchisors want and need their franchisees to succeed, and most work hard to provide their franchisees with the expertise, tools and coaching they need to be successful. However, a franchise still remains a business unit in its own right and franchisees are independent business people. Whatever business decisions they make can ultimately determine the success or failure of their business, even if a franchisor is present.
Their bottom line and success will be influenced by factors such as how well they execute the franchisor’s operating system, adhere to the rules and guidelines, whom they hire, how much they pay their employees, how they control their stock and money, what service standards they achieve, and how proactive they are in marketing their store. While the franchisor can offer advice and training in these areas, these decisions are the responsibility of the franchisee.