Purchasing a franchise is one of the safest ways to start your businesses; you’d practically be buying a brand with an established system so you wouldn’t have to worry about building your business’ name or figuring out your marketing, management, and operational scheme.
So, let’s say you’ve decided to go into business and purchase a franchise, the next question is what kind of franchise business would fit your budget, target location and market, and the type of industry you’d want to do business in.
When talking about industries offering franchise opportunities, you’d often think about quick service restaurants (QSR) brands such as McDonald’s or a convenience store franchise like 7-Eleven. But there are more types of franchises that aren’t just about food or retail. So, let’s take a look at the different types of franchises so you can find out which is the right one for you:
Product Distribution Franchise
In this type of franchise, the franchisor gives the franchisee/investor the right to distribute goods. It’s quite similar to a supplier-dealer relationship, but in this case, the franchisee follows a strict guideline and usually can only sell the franchisor’s brand. This is perhaps the easiest for first-time business owners as it’s generally of a smaller scale and doesn’t have some complicated system; you’d merely be selling products of well-known brands, and the franchisor would often assist with marketing (such as providing signage and posters).
An example of this would be an exclusive seller of Coca-Cola products or automotive parts of a particular automotive company such as Ford or Honda.
Business Format Franchise
A business format franchise is where the franchisee is given not only the right and means to sell/offer the franchisor’s products and services under the franchisor’s name, but to use the franchisor’s business system including (but not limited to) marketing, operations, quality control, and training. In other words, you’d be buying the business itself (the products/services and the system) and establish an outlet under the brand. The franchisor will make sure that since you’re using their trademark, that you follow a level of uniformity and uphold a level of standard that’s also observed to be other branches/outlets. When it comes to “franchising”, this is often the one that comes to mind.
Well-known examples of business format franchise would be McDonald’s, Starbucks, and KFC, but they’re not limited to the food industry; there is business format franchise offered under the retail, lodging (hotels), and even construction industries.
Manufacturing franchise is where the franchisor gives the franchisee the right (and the means) to produce or “manufacture” items under their brand. Food and drink companies often offer this and also automotive industries. In comparison to “Product Distribution” franchise which allows a franchisee to buy and sell products from a brand, manufacturing franchise allows the franchisee to produce and sell the product. Often, the raw materials and equipment needed for the production are provided by the franchisor to ensure the same level of quality for the product being manufactured and sold.
Franchise businesses are relatively low risk, have great support from franchisors, and just overall easier to manage (some even have the franchisor manage them for you). Luckily, franchises aren’t only limited to quick service restaurants (QSR) or fast food restaurants so that you can choose from a plethora of franchise types of your liking, or the one that you think has the best potential to thrive in your location. So keep these in mind when you’re picking out the right one for you and your area.