What Is a Franchisee?

A franchisee is a small business owner who operates a franchise. The franchisee

has purchased the right to use an existing business's trademarks, associated
brands, and other proprietary knowledge to market and sell the same brand, and
uphold the same standards as the first business. Franchisees become owners
and independent operators of third-party retail outlets called franchises.

Franchises are an extremely common way of doing business. In fact, it is hard to

drive more than a few blocks in most cities without seeing a franchise business.
Examples of well-known franchise business models include McDonald's (NYSE:
MCD), Subway, United Parcel Service (NYSE: UPS), and H. & R. Block (NYSE:
HRB). In the United States, there are franchise business opportunities available
across a wide variety of industries.

 
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.

Understanding Franchisees
When a business wants to garner more market share or increase its
geographical presence at a low cost, one solution could be to create a franchise
for 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
buys into the original company by purchasing the right to sell the franchisor’s
goods or services under the existing business model and trademark.

Why Become a Franchisee?

Operating a franchise could be an ideal venture for entrepreneurs with little
experience because 1) the costs of opening a franchise are low compared to
starting a company from the ground up, so franchisees require very little capital
to start; and 2) franchisees get a lot of help, as franchisors supervise their new
franchisees closely.