Types of Franchising
Franchising is just a term used to describe a business format that is too huge to be described in a mere word. There are different types of franchising, all of which have their own advantages. These types are not rigid; a business model can be a combination of two or more such models. Let us have a look at the various types of franchising
• Large business Franchise In this format, the franchisee buys the franchise rights of a very big and well known brand and then tries to leverage that to their own advantage. Usually in such cases the royalty paid is high. In return for high fees, the franchisee’s business gets instant recognition and it can also cash in on existing customer base of the franchisor. Advantage Since the franchisors brand is well established on a global level, the franchisee gets access to a wider customer base, a high level of recall and also a strong sense of brand loyalty. Disadvantage The initial cost of investment can be high.
• Home based Franchise This is an ever increasing segment because this gives the franchisee the option of working from his/her home and sometimes at his/her own convenience. This is a profitable business as one can use the expertise and finances of the franchisor to expand his business. Advantage Since one does not need to purchase and maintain a commercial property, the initial cost of investment is low. Also home based franchisees usually get special attention from the franchisor. Disadvantage Working from home can make one complacent and this can lead to loss of business. Also there is limited exposure when one works from home.
• Small business Franchise This is a low budget business which is run by leveraging a well known brand. This format usually turns out to be beneficial for both. Here too the franchisee can use the franchisors expertise to take his business forward. Advantage The franchisor provides the franchisee with a solid platform to take his business forward. Disadvantage Usually in such cases the franchisee does not get exclusive rights over his territory of operation.