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What is a franchise and what are the different types of franchising?

What is a franchise?

There are numerous types of franchise models available in a variety of industries. If you want to open a new franchise, you should know beforehand which industry you want to be involved in, how much money you can commit, and how much time you have available to invest.

Franchising is a versatile business model that can be applied to almost any type of business. Franchises can be classified based on a variety of factors such as investment level, franchisor strategy, marketing, operations, relational type, and others. There are five distinct types of franchises. Let's take a quick look at all of them.

 

Job Franchise

A Job-Franchise is typically a low-investment franchise (often home-based) that can be run independently or with minimal staffing (less than 5). The franchise is only required to pay a franchise fee and a small amount of money for startup costs such as equipment, basic materials, and, in some cases, a vehicle. A wide range of industries, most of which provide services, can be franchised in this way. E.g. Residential lawn care service, pool maintenance service, plumbing service, etc.

 

Product Franchise

Product franchise, also known as Distribution Franchises, and where the franchise distributes the parent company's products and some related services. The parent company typically provides the use of its branded trademark, but not an entire business management system. The majority of product franchises are large product dealers. As a result, product or distribution franchising accounts form the greatest percentage of total US retail sales.

Sometimes the parent company licenses are not only distribution rights, but also a portion of the manufacturing process to its franchisees. Soft drink manufacturers, such as Pepsi and Coca-Cola, are common examples of this type of franchising.

 

Business format franchise

The most common type of franchising is business format franchise, and it is what most people think that what a franchise industry is all about. This is probably why one of the most common objections to franchising is, "I don't want to work in fast food." Under the business format, a franchisee operates his or her business under the parent company's brand and receives the entire proven system for operating and marketing the products or services. E.g. Fast food franchises like McDonald’s, Subway, etc.

The parent company provides a detailed plan, comprehensive procedures, and extensive training on almost every aspect of the business, as well as both initial and ongoing support. 

 

Investment franchise

An investment franchise is typically a large-scale business that requires a substantial capital investment (huge compared to other franchising options). The franchisee is a major investor who provides the funds and management team or sometimes hires their own franchisee, to run the business. This type of franchising is used primarily to generate a return on investment with minimal personal involvement, as well as a potential capital gain upon exit. E.g. Big restaurants, cafes, etc.

 

Conversion Franchise

Conversion franchising is the only hybrid model of the five types of franchising. It is a method of expanding franchise systems in which a franchisee enters into an agreement with an existing company and converts it into a franchise unit. The parent company's trademarks, marketing, and advertising programs, training system, and client service protocols are all adopted by the franchise.

Because the franchisee is not starting a new business from scratch, it has its own benefits and is a way for existing businesses to experience rapid growth. The fundamentals of the business, as well as a level of clientele, are already in place. The independent company that enters into a franchise relationship benefits from the strength of a popular, successful brand, as well as all of the support systems that come with it.

 

Begin with Simplified Marketplace

Are you ready to speak with a franchise expert about purchasing a franchise business? Simplified Marketplace has a low-cost, mid-cost, and high-cost opportunity for everyone. Discover premium brands, become your own boss in a field you enjoy, and connect with other entrepreneurs who share your passion.

If you'd like to learn more about what is a franchise and franchise opportunity, please contact us at www.simplifiedmarketplace.com

 

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