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Home Business Four (#4) Types of Franchise Businesses

Four (#4) Types of Franchise Businesses

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By definition, franchise businesses are all about following a reputed brand, using its methods of business, and paying a small fee to the “Franchisor”. Now, the business gets the liberty of knowing the franchisor’s secrets and consequently using its “fame” to make some money. Around the world, there are many franchise ventures. In fact, some of these ventures have spread across all continents, and are making billions of dollars each year. This includes intangibles, food varieties, and tangible items. In order to become a franchise business owner, you need to meet the requirements of the franchisor.

With this being said, here are a few important types of franchise businesses.

Related Post: How to Be a Good Franchisee

#1 Business Format

Business Format Franchise

Business Format Franchises are considered to be the most commonly found types in the market. this is where a business chooses to expand by supplying “newbie business owners” with the recipes of a well-established one. Both the trademark, name and policies will be shared with the newbie business.

Most of the time, the franchisor would help the newbie build and launch the brand. In the long run, the parent company would assist the independent owner with tips, and instructions on how to keep the business running. As a result, the independent owner of the newbie business would pay royalties and a fee. Many a time, the franchisor would be responsible for supplying “raw materials” to the newbie.

A very good example of this type of franchise would be the fast-food joints.

Also Read: A Basic Guide on Sole Proprietorship

#2 Product Franchise

As suggested by its name, this type of franchise focuses on the sales of products. This is where the manufacturer controls the methods used by retail stores to shop and sell their products. Product franchises are often governed by multiple rules and regulations. However, the newbie business is given the privilege to use the manufacturer’s actual trademark and name. In order to secure this right, the newbie business (or store) owner has to pay a big amount of money. Also, they need to buy products from the manufacturer.

A suitable example for this kind of franchise would be the tyre stores.

#3 Manufacturing Franchise

Manufacturing Franchise

Next in line would be the manufacturing franchise. This type of franchise businesses receive “permissions, or grants” from the manufacturer. Thus, they will be allowed to sell goods and even produce items using the parent company’s trademark and name.

This franchising method is extremely famous amongst beverage and food companies. For instance, the bottlers tend to obtain the rights from “parent” soft drink companies. Consequently, they will be allowed to produce the drink, manufacture the bottle, and eventually distribute the soft drink.

#4 Business Opportunity Ventures

The last type of franchise business in this list would be the “Business Opportunity Ventures”. This is where independent business owners take the risk of buying and selling products that belong to a different company. The parent company is responsible for providing the newbie independent business owner with accounts, or client information. Whenever a successful business happens, the independent business owner has to pay a fee to the parent company.

A common example to describe this type of franchise business would be the “vending machines”.

Also Read: Does Network Marketing Really Work?

Future of Franchising

Franchising has seen many success stories. For instance, McDonald’s and KFC are two famous franchises found around the world. Since the early 1950s, this business model has been famous. It is not going to disappear anytime soon. With rapid population shifts and new metropolitan areas – the scope for different types of franchise businesses is only going to get better. In fact, universities and schools have started to include “Franchising” in their curricula.

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