What is the meaning / definition of Franchisor in the hospitality industry?
A person or company that grants a franchise to an individual, group or business through an agreement.
Their role consists of providing everything necessary for the franchisee to operate their business accordingly to the franchisee agreement. A franchisor generally provides a brand, marketing operational procedures and more allowing the franchisee several benefits. Being a Hotel Franchise Company allows a business to grow at a higher pace than organic growth would allow. As the franchisee often incurs most of the costs and the franchisor mostly reaps the royalty fee for his services, this is also a low risk way of growth for companies. The most famous franchisor in the hospitality industry is McDonalds, with its stores spread over the whole world.
Franchisors benefit from franchise agreements because they allow companies to expand much more quickly than they could otherwise. A lack of funds and workers can cause a company to grow slowly. Through franchising, a company invests very little capital or labor because the franchisee supplies both. The parent company experiences rapid growth with little financial risk.
A company can also ensure it has competent and highly motivated owners and managers at each outlet through franchising. Since the owners are largely responsible for the success of their outlets, they will put in a strong and constant effort to make sure their businesses run smoothly and prosper. In addition, companies are able to provide franchising rights to only qualified people.
Disadvantages to franchisors include a lack of control over franchisees, reputational risks, and slow growth through franchising compared to mergers and acquisitions.
- Franchise Agreement
- Franchise fee
- Royalty Fee
- Franchise disclosure Document