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Definition: Franchisor

Franchisor is defined as a company (or a person) who allows other individuals (called Franchisees) to use its own name, trademarks, products & services and business practices in return of an agreed upon fees.

A franchisor sells the rights of business to a franchisee for an initial fee called Franchisee Fee which is paid at the time of signing the contract. In addition franchisor gets Royalty Fees on a regular basis from each of its franchisees which is either fixed or variable (usually certain percentage of sales).

This practice (known as Franchising) allows franchisor to find stores for selling its own products or services without having to do any financial investment in building stores since the stores are owned by the franchisees. Franchisor mainly acts as a supplier of products and as a mentor for the franchisees to teach them the standard practices of doing business.

e.g.) McDonalds is a franchisor and sells rights to different individuals to operate stores under its brand name. McDonalds does not own these stores but it can direct and assist operators on issues like which items to be served, their price levels along with providing proper training to the employees of stores.  Also it allows operators to use its name and logo on their stores.

Hence, this concludes the definition of Franchisor along with its overview.

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