Franchisor vs. Franchisee: What’s the Difference?

Franchise terminology can be confusing. Premium Service Brands has the breakdown of differences between the franchisor vs. franchisee, and their responsibilities to provide clarity.

Small Business Boom

The post-pandemic entrepreneurship boom is in full swing. People are tired of the lack of job security in corporate America. To cope with layoff anxiety, they are investing in themselves by launching a business of their own. Over the past two years, more than 10 million businesses were created in the United States and the number continues to rise. In February of 2023, new business applications reached 429,800, up 1.9% from January, according to the U.S. Census Bureau.

There are more than 790,492 franchises in the U.S. and the industry employs 8.4 million people, according to the International Franchise Association. Being able to launch a turnkey venture with proprietary systems and brand recognition is appealing to many new entrepreneurs. Having training, guidance, and ongoing support with the backing of a proven brand helps ensure that a new business becomes a mainstay in the community it serves.

If you’re considering pursuing a franchise opportunity, it’s important to understand the industry lingo as you conduct your due diligence to make decisions that will help you achieve your financial and lifestyle goals.

In layman’s terms, a franchisor is a company that owns the rights to a business concept or brand and grants those rights to others to operate their businesses using that concept or brand. And a franchisee is a person or company that buys the rights to use the franchisor's business concept or brand to operate their business. While the responsibilities are different, the objective is to form a working partnership that is beneficial to both parties.

Franchisor’s Job

The franchisor provides the franchisee with a proven business model, franchise training and support, marketing and advertising, and access to proprietary products or services. The franchisor may also provide the franchisee with equipment, supplies, and inventory at a discount. In return, the franchisee pays an initial fee and ongoing royalties.

The franchisor plays a crucial role in ensuring the success of the franchisee's business by providing ongoing support and assistance. This may include operational guidance, marketing support, and regular training and education opportunities.

Role of a Franchisee

The franchisee, on the other hand, is responsible for operating their own business using the franchisor's business model and brand. They must adhere to the franchisor's standards and guidelines and pay ongoing royalties to the franchisor. The franchisee must also manage their finances, hire and train employees, and market and promote their business.

The terms "franchisee" and "franchise owner" typically refer to the same thing, which is the person or company that owns and operates a franchised business.

Bonus Franchising Vocab

There are a few other terms you’re likely to come across about franchising that are good to know.

  • Financial Disclosure Document (FDD): The FDD is designed to provide potential franchisees with the information they need to make an informed decision about whether to invest in a franchise, including a history of the company and insight into its financial performance and fees.

  • Validation: The process of gathering information and evaluating whether it's a good fit. During validation, potential franchisees explore the FDD, speak with current owners in the system, research the market, and get guidance from legal and financial professionals.

  • Meet the Team Days: During this event, potential franchisees travel to a franchisor's corporate headquarters to meet with the management team and learn more about the franchise system and business model. They usually get to visit a location in the field and meet with current franchisees to discuss the business.

Invest in a Symbiotic Franchisor/Franchisee Relationship with Premium Service Brands

Premium Service Brands (PSB) is the franchisor parent of nine brands in the recession-resistant home services sector, including 360 Painting, ProLift Garage Doors, Maid Right, Kitchen Wise & Closet Wise, Renew Crew, Rubbish Works Junk Removal, The Grout Medic, House Doctors, and RooterMan. We have more than 18 years of experience helping small business owners achieve their entrepreneurial dreams. We’ve already done most of the heavy lifting, so you’ll start with a proven business model designed to get you on the right track.

We provide our franchisees with the tools they need to run successful businesses, including training, product development, and ongoing support. And our portfolio of brands allows franchise owners to pursue multiple revenue streams in the lucrative home services industry.

If you still have questions about the differences between the franchisor vs. franchisee or want to learn more about partnering with PSB to launch a business in the home services industry, fill out the form to get started today.