3 Main Types of Franchises – 3 Franchise Models

A franchise is a fantastic way to do business. This is because the brand is already established by someone else and because they require distribution support they generally choose the method of hiring franchises.

In most cases of establishing franchises, the brand Equity the methods and all the procedures of the parent brand is adopted and the franchise just replicates what the parent brand is doing but because the parent brand can hire a number of franchises, redistribution happen much faster.

There are three different types of franchises available in the market

1. Business  format franchise
2. Product distribution franchise
3. Management franchise

1 ) Business format franchise

a business format franchise is one wherein all the different aspects of the business are copied and replicated at a particular location. Some of the best examples of the business level franchise is Mcdonalds KFC and other such fast food chains

In a business format franchise, the parent franchisor is the one who is responsible for brand building and for executing all the pull Strategies for the business. For example, McDonald’s started in the US and it had great success over there. But now when it wanted to expand across the world it decided to enter franchising. As a result, it is the taste of McDonald’s that consumers are looking for and by placing different franchise’s across the world, McDonald’s has replicated the same taste all across.

with the above example, it is clear to understand that the franchise in a business format franchising uses Trademark of the parent brand.  it is the franchisor which is responsible for pulling the customers to the franchise.  a very strong agreement is made between the franchisor and the franchise with regards to overall operations of the business.

In a business format type of franchise, all the decisions are made by the parent brand full stop the complete service blueprint is decided by the parent brand and then it is replicated across all the franchise stores full stop.

2) Product distribution franchise

As the name suggests Product distribution franchise is a form of business where the distribution of the product is dependent on the franchise.  the franchisor selects such a franchise because the franchisor cannot reach all places but at the same time, the distribution of the product is equally important.

It is quite possible to get confused between the role of a  product distribution franchise versus that of a retailer or distributor.  however, do note that in case of a product distribution franchise is actually paying money to the franchisor to use The trademark of the brand and to distribute the products.

the best example of a product distribution franchise is observed for the likes of Pepsi and Coca-Cola. A franchise has to pay good money to get the product distribution franchise of These brands. It is observed that both Pepsi and Coca-Cola instead of delivering the product to the end customer delivers a bulk amount of product to the product franchise. it is the responsibility of the product franchise to deliver the product to the retailers who are near to them.

it is important to note that in the product franchise type of franchising control of the franchisor over the franchise is not as absolute as the business level franchise format.  in the product label franchise, the franchises are only responsible for the product and the quality of the product. the distribution and all other business arrangements have to be made by the franchise.

3)  Management Franchise

This is a very simple type of franchising wherein all the management decisions have to be taken under franchise level and the franchisor is responsible only for the operation.  we can explain the management franchise type of franchising very easily by taking the example of a supply chain operations let us take the example of FedEx.

as you know FedEx has the presence all across the globe. It runs  regular operation picking up documents or other parcels from the customer and delivering it the desired address, however, FedEx cannot be present everywhere to pick up the parcel from the customers this is where it uses a franchise model

FedEx as a franchise highest franchise which conducts all the management functions for the brand the franchise of FedEx is responsible for collecting the parcel from the customer and collecting all of the details such as collecting the delivery address, quoting the right price for the transfer, I am collecting the payment from the customer.  FedEx will only be responsible for the delivery of the parcel from the customer to the desired delivery address from

the above example, we can understand that the franchisor, in this case, handles the major operations of the business whereas the smaller did today running operations are handled by the franchise.  the more capable the franchisor the higher will be the fees to be paid by the franchise for operating this business.  franchises which have a very good experience of managing people or managing a business will thrive in this type of franchising. At the same time in the management type of franchising, it is a franchise which is responsible for business development and increasing the overall business to the parent brand.

The above were all the different type of franchises that exist in the market.  besides these, there are also other different relations that exist between the franchisor and the franchise besides the above classification there is one more classification type which can be used to dip define the types of franchises existing in the market.

Distribution in the different Types of franchise (Franchising model 2)

The types of franchise which can be classified on the basis of who is involved in the franchising process.  it considers the manufacturers wholesalers the retailers as well as different service firms which are involved in the franchising process.  hence it is more of a hierarchy based different type of franchise model.  let us know find out all the stages of this franchise model

1)  From manufacturer to retailer

this type of a franchise is a very flat structure in this particular type of franchising the manufacturer directly gives a franchise to a particular end buyer.  the best example of this type of franchise is car manufacturers you

observe Honda Yamaha Audi BMW all of these brands have frequent franchisees which are directly appointed by the franchisor that is the parent brand.  in this format, the franchise store which sells the product of a parent brand is known as a direct franchise.  this direct franchise has all the authority from the franchisor to sell the product to the end customer.  many a time and exclusive agreement is formed between the franchise and the franchisor so that the franchise cannot sell any other brand from the airport

2)  From manufacturer to wholesaler

this type of a franchise is very commonly observed in the food market, the apparel industry and the technology industry. In this type of franchise, the franchisor actually shares all the recipes ofMaking the food item and the wholesaler is responsible for both the production as well as the sales of the product the wholesaler only has to give The trademark fees to the franchisor.

in the technology industry it is observed that a for manufacturer cannot replicate the production in a different region then he will frequently appoint the wholesaler and share all the trade secret to the wholesaler and will enter an agreement as a franchisor the wholesaler will be responsible for the production and distribution of the technical products but I will at all times be paying the fees for the franchisor for the use of trademark

3)  From franchisors to service providers

Do you again very similar to the business level franchising which described above.  and this format the franchisor who is  The trademark holder Looks for the franchise which can get customers for the franchisor.  this franchise is generally service providers.

Example – Trademark holder wants to sell his products on Amazon.  Trademark holder Can either sell the product directly on Amazon for you can appoint a service franchise who keeps his Trademark product in stock and then sells it on all different E-Commerce portals.  the only thing that the franchise is doing is keeping the stock and selling the product forward where is all the marketing and brand building activities are done by the franchisor itself

Besides the above example of e-commerce, there are many offline businesses as well as McDonald’s pizza hut KFC etcetera which observe this type of franchise model.

About the complete explanation for all the different type of New Jersey which exists in the market depending on the market as well as the franchisor different type of franchise is can be appointed by the franchisor.  all the different industries generally pick one type of franchising process, for example, the logistics Industries generally use the management type of franchises.

The food industry, as well as the consumer durable industry, can use a mix and match of either the business level for the franchise or the product label franchise.  all in all, in all these cases the brand building and pulling the customer to the brand is the responsibility of the franchisor where is interaction with the customer and ensuring customer satisfaction, as well as repeat business, is the responsibility of the franchise.