when a business wants to garner more market share or increase its geographical presence at a low cost one solution is to create a franchise using its product and brand name the franchisor is the original or existing business that sells the right to use its name and idea the franchisee is the individual who purchases the right to sell the franchisor s goods or services using its existing business model and trademark 
the franchisee franchisor relationshipthe relationship between a franchisee and a franchisor is inherently one of advisee and advisor the franchisor provides guidance and support on hiring and training staff setting up shop advertising its products or services sourcing its supply and so on in return for the franchisor s advisory role use of intellectual property and experience the franchisee generally pays a startup fee plus an ongoing percentage of gross revenues to the franchisor at the start the franchisor assigns the franchisee an exclusive location far enough from its other franchises to avoid competition there are benefits and drawbacks to investing in an already successful business as with any investment research your options thoroughly before you decide to purchase a franchise franchisee benefitsoperating a franchise can be an ideal venture for an entrepreneur with little direct experience in business management because franchisee responsibilitiesa franchisee must follow the proven business model that is already in place down to its choice of location furnishings products and decor franchisors require this to maintain consistent quality among all of the locations using its brand name the franchisee is responsible for growing the franchise via the usual means of advertising and marketing within its exclusive area of operation however all marketing campaigns must be approved by the original establishment before their release as the manager of the franchise the franchisee is expected to protect the brand name by offering only approved products and services that are created by or sourced by the original company franchise example mcdonald sa company that notably grew a global presence using the franchise model is the fast food behemoth mcdonald s mcdonald s was founded in 1940 by the mcdonald brothers in san bernardino california however it was their business associate ray kroc who opened the first official franchise for the mcdonald s system inc a predecessor of today s mcdonald s corp mcd in 1955 in des plaines illinois a suburb of chicago kroc later bought the business from the brothers 1as of 2023 there were more than 38 000 mcdonald s restaurants in more than 100 countries and 93 of them are owned and operated by local business people 2mcdonald s either owns the land and buildings used by the franchisees or secures long term leases for the franchised sites as part of the contractual agreement with the company the franchisee pays a portion of the cost of seating d cor and signs in the location that the company provides mcdonald s indicates that it will only consider franchise buyers who have at least 500 000 in non borrowed personal resources 3the legendary success of the mcdonald s franchise story is partly a result of the company s commitment to maintaining consistent standards in its food a big mac in los angeles should and does have the same quality as one in london franchisees manage their own pricing decisions and staffing matters while benefiting from the brand equity and global experience of mcdonald s 