An accurate definition of franchise could be that of an agreement between 2 parties: franchisee and franchisor.
- The franchisee will obtain the brand cession, a product/service that has a certain demonstrable profitability, and a consolidated image in the market.
- The franchisor will make a certain financial investment to ensure that the business operates and will be committed to working hard to achieve this.
Nowadays you can find franchises of all kinds of products or services. For example, there are franchises for takeaway coffee, the laundry business or Internet services, among many other things.
Before taking such an important step, it is essential to know the conditions of each franchise. First, you should know that there are different types of franchises with very detailed characteristics.
Don’t know them? Keep reading!
The most common types of franchises
1. Production Franchise
This type of franchise is when the franchisor oversees the manufacturing of the products, while the franchisees are in charge of selling them.
The great advantage of a production franchise is that the franchisor achieves a minimum sales rate. This is because, under the terms of the contract, franchisees are obliged to purchase the products on an exclusive basis.
2. Commercial Franchise
You may be familiar with the commercial franchise, as it is one of the most common franchises that can be found. The franchisor is responsible for providing the franchisee with everything they need to run the business.
The aim of this model is to clone the franchise system in another location, achieving the same success.
3. Industrial Franchise
The industrial franchise is similar to the previous ones, although with some important changes.
The franchisor not only offers the franchisee the way to proceed (known as the How Know) but also the rights to manufacture the branded products and the marketing of what has been manufactured. Administration, sales, and management processes may also be included in the agreement.
However, there are limits to these concessions: most commonly, the franchisee only acquires the product rights to a part of the product and has a specific geographic area to sell what has been produced.
4. Service Franchise
The franchisee is engaged in the sale of a service or services following the guidelines set by the franchisor.
The main difference of the service franchise, compared to the types we have already seen, is the control by the franchisor. This is usually much stricter and more detailed. The franchisor will have to make sure that the method followed to make the service work is the right one.
As it can be a bit complicated to understand this type of franchise, two examples that illustrate this concept well are: healthcare or courier companies.
5. Distribution Franchises
The distribution franchise is characterized by placing the franchisor as the purchasing center.
This means that this part will be dedicated to the purchase of items from other suppliers. They will be forwarded to the franchisee who will be responsible for their distribution.
Some examples of distribution franchises are companies dedicated to the world of design or fashion in general.
6. Corner Franchise
We may define a corner franchise as one in which the commercial activity is carried out in an establishment that is already operational and functioning. However, its commercial scope must be linked to that of the franchisee.
It is easier to understand the concept of a corner franchise as a small space within an establishment that will be used to market the products or services of the brand in question.
7. Shop in Shop Franchise
It could be described as a type of corner franchise. The difference is that there will not only be a single space, but several spaces in the same establishment that are aimed at the sale of products or services.
Another particularity that identifies this type of franchise is that the spaces are decorated as a larger store of the brand.
8. Master franchise
Finally, we have the master franchise concept, which is usually the most complicated.
This is a franchisor that will be in charge of licensing a franchise to a certain company in a delimited space (such as a country).
The franchisee receiving the license may act as a secondary franchisor to issue new licenses in its territory.
Now that you know the main types of franchises, it's time to reflect on which one is best suited to your type of business.
What types of franchises are there?
Thinking of quitting your job and becoming a successful entrepreneur? Although there are many ways to achieve this ambitious goal, the franchise formula tends to work very well.
An accurate definition of franchise could be that of an agreement between 2 parties: franchisee and franchisor.
- The franchisee will obtain the brand cession, a product/service that has a certain demonstrable profitability, and a consolidated image in the market.
- The franchisor will make a certain financial investment to ensure that the business operates and will be committed to working hard to achieve this.
Nowadays you can find franchises of all kinds of products or services. For example, there are franchises for takeaway coffee, the laundry business or Internet services, among many other things.
Before taking such an important step, it is essential to know the conditions of each franchise. First, you should know that there are different types of franchises with very detailed characteristics.
Don’t know them? Keep reading!
The most common types of franchises
1. Production Franchise
This type of franchise is when the franchisor oversees the manufacturing of the products, while the franchisees are in charge of selling them.
The great advantage of a production franchise is that the franchisor achieves a minimum sales rate. This is because, under the terms of the contract, franchisees are obliged to purchase the products on an exclusive basis.
2. Commercial Franchise
You may be familiar with the commercial franchise, as it is one of the most common franchises that can be found. The franchisor is responsible for providing the franchisee with everything they need to run the business.
The aim of this model is to clone the franchise system in another location, achieving the same success.
3. Industrial Franchise
The industrial franchise is similar to the previous ones, although with some important changes.
The franchisor not only offers the franchisee the way to proceed (known as the How Know) but also the rights to manufacture the branded products and the marketing of what has been manufactured. Administration, sales, and management processes may also be included in the agreement.
However, there are limits to these concessions: most commonly, the franchisee only acquires the product rights to a part of the product and has a specific geographic area to sell what has been produced.
4. Service Franchise
The franchisee is engaged in the sale of a service or services following the guidelines set by the franchisor.
The main difference of the service franchise, compared to the types we have already seen, is the control by the franchisor. This is usually much stricter and more detailed. The franchisor will have to make sure that the method followed to make the service work is the right one.
As it can be a bit complicated to understand this type of franchise, two examples that illustrate this concept well are: healthcare or courier companies.
5. Distribution Franchises
The distribution franchise is characterized by placing the franchisor as the purchasing center.
This means that this part will be dedicated to the purchase of items from other suppliers. They will be forwarded to the franchisee who will be responsible for their distribution.
Some examples of distribution franchises are companies dedicated to the world of design or fashion in general.
6. Corner Franchise
We may define a corner franchise as one in which the commercial activity is carried out in an establishment that is already operational and functioning. However, its commercial scope must be linked to that of the franchisee.
It is easier to understand the concept of a corner franchise as a small space within an establishment that will be used to market the products or services of the brand in question.
7. Shop in Shop Franchise
It could be described as a type of corner franchise. The difference is that there will not only be a single space, but several spaces in the same establishment that are aimed at the sale of products or services.
Another particularity that identifies this type of franchise is that the spaces are decorated as a larger store of the brand.
8. Master franchise
Finally, we have the master franchise concept, which is usually the most complicated.
This is a franchisor that will be in charge of licensing a franchise to a certain company in a delimited space (such as a country).
The franchisee receiving the license may act as a secondary franchisor to issue new licenses in its territory.
Now that you know the main types of franchises, it's time to reflect on which one is best suited to your type of business.