Franchising is a highly flexible business model, and nearly any kind of business in any niche can be turned into a franchise. Established companies use franchising models to allow third parties to use their trade-name to operate an independent entity.
There are various franchises classified based on factors like strategy, marketing, operations, or relationships. Here are some of the main types of franchises and the differences between them.
These tend to follow a home-based business model and are often targeted towards people who want to operate a small franchise independently. These are typically inexpensive to set up, as the franchisee will need to purchase minimal stock and equipment to get up and running.
Some businesses that might fit into this category could be plumbing, drain cleaning or commercial and domestic cleaning services.
Franchises that focus on a product are usually based on a relationship between a supplier and a dealer. The franchisor will allow the franchisee to use its trademark, but it is unlikely they will also provide a system for running a business.
These kinds of franchises can deal with large products, like cars or machinery. In addition to this, however, some product franchises will license part of the manufacture of goods and their distribution. This is the case with soft drinks suppliers like Pepsi and Coca-Cola.
Business Format Franchises
In a business format franchise, the franchisee will also have permission to use a franchisor’s trademark. However, in addition to this, they will also gain access to the entire system to operate the business successfully. The franchisor will often deliver a detailed business model and breakdown of procedures to help ensure the franchisee’s success.
Popular businesses that follow this model include things like fast-food chains, retail stores and restaurants. Many such franchise opportunities are available in the UK.
This form of franchise is generally for large scale projects that need a significant amount of capital investment. The franchisee will typically invest money into the business and then bring their own team or franchisor to take care of the operations. The overarching idea with these businesses is for franchisees to invest and then distance themselves from the operations to make a return on their capital.
Some types of businesses that follow this model are things like hotels and large restaurants.
These models are a twist on the conventional franchisor-franchisee relationships. Many franchises grow by changing independent businesses within an industry into franchises. These can then adopt trademarks and the infrastructure of the franchise to develop further. These tend to use business models that facilitate rapid growth.
Industries that use this model include real-estate agents, professional services businesses and home services like plumbing.
In summary, there are five main types of models that most franchises will fit into. While these can be further subdivided based on various factors, it is essential to understand a franchisor’s model if you are looking to invest in a franchise. The operations of a franchisor can affect your odds of success when setting up a franchise, as some offer more guidance than others.