A franchisor is the business that owns a brand and a proven way of running it, and gives other people the right to trade under that brand using its system. The people who buy that right are franchisees. They usually pay an initial fee and then an ongoing fee, and in return they get the name, the operating model, training and support. This guide explains what a franchisor is, what it actually does day to day, how it earns its money, how franchising is regulated in the UK and what it takes to become a franchisor.
Franchisor meaning and the business format franchise
HMRC’s business manual puts it simply. Under a business format franchise agreement, the owner of an established business format (the franchisor) grants another person (the franchisee) the right to sell products or perform services using that system. Business Gateway describes the business format franchise as the most common form of franchising: the franchisee runs a copy of an already successful business so that customers get a consistent offer wherever they buy.
So the franchisor meaning comes down to two things it owns and controls:
- The brand: the trade name, logo and other intellectual property the network trades under.
- The system: the way the business is run, written down in an operations manual and taught through training, so a franchisee can repeat the original business’s results.
The franchisee owns and runs its own outlet, often as a separate limited company, but the franchisor keeps control of how the brand is used and how the products or services are sold. That balance of independent ownership and central control is what makes franchising different from opening branches or simply licensing a name.
The difference between a franchisor and a franchisee
The franchisor builds and protects the model; the franchisee invests in a unit and runs it to the franchisor’s standards. The table below sets out the usual split. The exact detail is always in the franchise agreement, so treat it as a typical picture rather than a rule.
| Area | Franchisor usually | Franchisee usually |
|---|---|---|
| Brand and intellectual property | Owns and registers the trade marks, protects the brand | Uses the brand under licence, as the agreement allows |
| Operating system | Writes the operations manual and keeps it up to date | Follows the manual and the brand standards |
| Training and support | Gives initial training and ongoing field support | Attends training, trains its own staff |
| Marketing | Runs national or network marketing, often from a marketing fund | Contributes to the fund and does local marketing |
| Money | Receives an initial fee and ongoing fees | Funds the set-up of its unit and pays the fees |
| Running the outlet | Monitors performance and standards | Owns the outlet, employs staff, serves customers |
The role of the franchisor
Running a franchise network is a different job from running the original business. A franchisor’s week tends to be spent on:
- Recruiting franchisees. Finding, vetting and approving the right people, often through franchise exhibitions, recruitment marketing and brokers. Our franchisee recruitment and lead generation sections list firms that help with this.
- Training. Teaching new franchisees the system before they open, then keeping skills current across the network.
- Support. Field visits, help desks, purchasing, IT and marketing support. Business Gateway gives the example of a franchisee receiving manuals, a page on the main website and logins to IT and accounting software.
- Protecting standards. Checking that every outlet delivers the same experience, because one poor unit affects the whole brand. Our guide to keeping standards consistent across a network covers this in more detail.
- Improving the model. Testing new products, updating the manual and passing on what works.
How a franchisor makes money from franchise fees
HMRC says franchisees generally get the use of the system and management back-up for a set period, perhaps five to ten years, in return for an initial fee and continuing fees. The continuing fees can be a percentage of turnover, a mark-up on goods bought from the franchisor or a fixed payment per outlet, and they are intended to pay for services the franchisee needs in later years. Sprintlaw, a law firm, adds that most major UK franchises also collect a contribution to a central marketing fund. We explain each of these, and what they usually cover, in our guide to franchise fees, royalties and the marketing fund.
The ongoing fee is the important one for a franchisor. It pays for the support franchisees keep receiving, and it is what makes the network a business in its own right rather than a one-off sale of a business idea.
Franchise rules and regulations in the UK
There is no franchise-specific law in the UK. Pinsent Masons’ guide explains that franchising is governed mainly by contract law, competition law and intellectual property law, plus self-regulation through the British Franchise Association (BFA). The BFA Code of Ethics is not legally binding, but BFA members must follow it, and the code expects member franchisors to give full and accurate written disclosure of material information before anything binding is signed. Membership of the BFA is voluntary.
A few legal points come up for nearly every franchisor:
- Competition law. Restrictions on territories, prices and sales channels must comply with the Competition Act 1998. Franchise agreements are vertical agreements, and the Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 sets out which restrictions are allowed. Under the Order, fixing a franchisee’s minimum or fixed sale price is a hardcore restriction, while recommended and maximum prices are allowed as long as they do not work as a fixed or minimum price in practice.
- Trade marks. GOV.UK says a UK trade mark lasts 10 years and must be renewed every 10 years, and registering one costs at least £205. A franchisor that has not registered its brand has very little to license.
- Multi-level models. Pinsent Masons notes that the Trading Schemes Act 1996 may apply where franchisees recruit sub-franchisees.
Because the franchise agreement carries so much of the legal weight, most franchisors use a specialist. You can compare franchise agreement solicitors in our directory, and our guide to franchise agreements explains the main clauses.
Advantages and disadvantages of franchising for a franchisor
Franchising lets a brand grow with other people’s capital and effort. Goldstein Legal, a franchise law firm, lists the main attractions for the franchisor as income from franchisees for the use of the brand and business model, and a brand that reaches a wider area and audience than the owner could cover alone. The Intellectual Property Office makes a similar point about licensing in general: it can take a brand into territories the owner cannot cover itself.
The disadvantages are just as real. A franchise is unlikely to work unless the business already has a proven, profitable track record, and Goldstein Legal notes that franchisors often spend upwards of £30,000 before launch on a business analysis, a pilot, a prospectus, recruitment marketing and the agreement. Business Gateway warns that other franchisees can damage a brand’s reputation, which is why recruitment has to be thorough. The franchisor also gives up some day-to-day control, because each outlet is owned and run by someone else.
How to become a franchisor
Becoming a franchisor means turning a business that works into one that someone else can run from a manual. In practice that means proving the model in more than one location, protecting the brand, writing the operations manual, getting the agreement drafted, setting fees that leave both sides a profit and building a support team. Our step-by-step guide on how to franchise your business goes through each stage, and if you are deciding whether franchising is the right model at all, see franchising or licensing.
Most first-time franchisors bring in outside help for at least part of this. Our directory lists franchise consultants and franchise development firms, along with the accountants, marketing agencies and software providers that work with franchise networks.
Sources
- BIM57601, Franchising: general (HMRC Business Income Manual, GOV.UK)
- Franchising (Business Gateway)
- Operating a franchise in the UK (Pinsent Masons, Out-Law guide, October 2025)
- Franchise fees, what you’re really paying for (Sprintlaw, May 2025)
- The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022, SI 2022/516 (legislation.gov.uk)
- Franchising vs licensing, which is right for my business? (Goldstein Legal, 2015)
- Licensing intellectual property (Intellectual Property Office, GOV.UK, updated 1 April 2026)
- Register a trade mark (GOV.UK)
