The different types of franchising and their features
Franchising is no longer a new method of conducting business. It has in fact been in existence for many years. The presence of a large number of franchising food outlets in the world is evidence to the popularity of the franchising business. Are you planning to invest in a franchise? It’s worth remembering that you should conduct a bit of research before investing in any particular franchise.
Franchising can be described as an agreement in which the franchisor or the main organisation gives permission to the franchisee to conduct business using the trademarks and brand name of the organisation. Franchising contains a lesser degree of risk compared to the other methods of conducting business. This is the reason why budding businessmen prefer the franchising method.
Types of Franchises
The following are three types of franchises:
• Product franchise • Manufacturing franchise • Business format franchise
Product franchise – In this method, the franchisee has the right to sell the main organisation’s products. Moreover, the franchisee can also use the brand name and trademark of the main organisation. However, the franchisee will have to pay a stipulated fee to the franchisor.
Manufacturing franchise – In this franchising method, the franchisee can manufacture the products under the license of the main organisation. The franchise can then sell the products using the trademark of the original organisation.
Business format franchise – This is one of the most popular franchises in which the franchisee is trained by the franchisor or the main organisation. The franchisor or the owner will then in return get royalty fees. Understand the differences between these franchising types and you will be able to select a suitable one accordingly.