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Types of Franchising (Business Growth Series 3)



Franchising is a means by which an entrepreneur expands his or her business by having others pay for the use of the name, process, product, service and so on. Franchising is an agreement whereby the manufacturer or an entrepreneur of a trademarked product or service gives exclusive rights of local distribution to a Franchisee in ... Continue Reading

Franchising is a means by which an entrepreneur expands his or her business by having others pay for the use of the name, process, product, service and so on.

Franchising is an agreement whereby the manufacturer or an entrepreneur of a trademarked product or service gives exclusive rights of local distribution to a Franchisee in return for their payment of royalties and conformance to standardized operating procedures.

It is a legal arrangement by which one company allows its products, services or business format to be used by others for a fee.

The person offering the franchise is referred to as the franchisor while the franchisee is the person who purchases the franchise and is given the opportunity to enter the new business with a better chance to succeed than if he or she were to start from the scratch.

Recommended Article – 3 Intensive Strategies for Business Growth (Business Growth Series 2)

Types of Franchising

There are three major types of franchising which include:

  1. Product Franchising or Dealership:

In product franchising, dealers are given the right to distribute goods for a manufacturer.

The dealers act as the retail stores for the manufacturer but as is the case for any franchise, they benefit from advertising and management support provided by the franchisor.

A fee is paid by the dealer (the franchisee) for the rights to sell the trademarked goods of the producer (the franchisor).

This type of franchising is commonly obtained in petroleum and automobile industries.

  1. Manufacturing Franchising:

This type of franchise offers a name, image and method of doing business.

It is commonly obtained in the soft drinks industry.

Here the franchisor gives the dealer (bottler) the exclusive right to produce and distribute the product in a particular area.

  1. Business Format Franchising:

This is what most individuals mean when they use the term “Franchising” today.

Business-format franchising is an arrangement under which the Franchisor offers a wide range of services to the franchisee including marketing, advertising, strategic planning, training, production of operation manuals and standards and quality-control guidance.

The franchisors have an established name, reputation and methods of doing business.

Recommended Article – Reasons Why You Should Grow and Expand Your Business (Business Growth Series 1)

Courtesy: Focal Success

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