The three types of franchises

For those of you who may now be considering buying a franchise, there are some basic things to know about the franchise option for business ownership. Many people don’t realize that franchising, like any start-up business, has many facets of its own, and things you’ll need to familiarize yourself with and learn before you begin your search for the perfect fit for you. Getting really familiar with some of the more common franchise terms helps, yes, but it also helps to know what types of franchises exist. True, for every industry, there is a franchise, but franchises basically fall into three basic types.

Here, we’ll name those three types of franchises and explain a bit about what each entails.

Product franchises are the first type of franchise that we will analyze and explore. A product franchise is a great way for manufacturers to take control of how a retailer markets their product. The manufacturer gives the franchisee permission to distribute the product and allows the retail establishment owner to use that brand and trademark to further enhance promotion and build consumer trust. Product franchises are often a food service oriented business. However, the downside is that these can sometimes be based on fads, so plan your market research accordingly. Steve Steve Rosen, CEO of FranNet, had this to say about product franchising:

“A lot of product businesses are based on fads. It goes in cycles. People love coffee or ice cream or high-fat or low-fat stuff; they love or hate donuts. You have to keep that in mind.”

A business format franchise is likely to be one of the things that comes up the most in your search for the perfect franchise. You will find that this is a very popular type of franchise and there is a good reason for this. The company typically gives the franchisee not only a great system to run the business itself, but also often lends the name and trademark of the parent company. Often these are well-known brands and automatically inspire trust, so this is a great benefit to the business format franchise. Typically, the business will also provide a great deal of assistance in not only starting up, but in the ongoing management of the business, so this format is a great way for someone to become a business owner. , but without flying blind. Think of a business format franchise as a kind of safety net to ensure the success of the franchisees that are involved in it.

Manufacturing franchises are another area where big money comes into play and they are quite common as well. These types of franchises typically give a group or organization the rights to produce or manufacture a certain product again, with the ability to use that name and trademark for marketing and promotional benefits. This type of franchise is usually food and beverage, but can sometimes affiliate with other products as well.