A franchise is a business format that allows you to operate under the name and trademark of an existing company. For example, if you open a Amul franchise, you’re operating under the same name as all other Amul locations. However, you’re not necessarily required to buy your products from the parent company — you can purchase from any supplier.
However, there are many different kinds and categories of franchise and it might get confusing for you if you are looking to get into franchising. So here is a quick introduction to the various types of franchises:
-
Job-Franchise
A job franchise is a business where you can purchase the right to sell a product or service in a specific area. In this type of franchise, you buy the rights to sell a specific brand name and its associated products or services within a certain region. You also receive training from the franchisor on how to run your business, as well as ongoing support from him/her. Most job franchises are very lucrative because they have an established customer base and name recognition. The downside is that it may be difficult for you to expand beyond your territory unless you find another region that needs your services.
-
Product(or distribution) franchise
Product(or distribution) franchise – Product franchises sell products or services using the company’s brand name and logo. Examples include McDonald’s restaurants, Subway sandwich shops and Cold Stone Creamery ice cream stores. In exchange for using the company’s name, product franchisees pay royalties based on sales volume back to the franchisor each month. Distribution franchises work similarly to product franchises except their products are sold wholesale rather than retail. This means that instead of selling burgers at a restaurant location, they sell them to other restaurants which then resell them to customers under their own brands.
-
Business format franchise
A business format franchise gives entrepreneurs access to an entire business model including its name, logo, marketing materials, procedures and methods of operations — most often related to the franchisor’s core product or service. Franchisees purchase this all-inclusive package from the franchisor in exchange for a fee (the initial investment) and ongoing royalty payments (the ongoing investment).
Business format franchises are ideal for individuals who have no experience or training in a particular industry but who want to start their own business. They’re also good for people who want to work within an existing brand and leverage their expertise in another market or location.
-
Investment franchise
Investment franchises are those that require a significant financial investment to get started. In addition to the franchise fee, you may also have to pay for training or other services that help you get up and running. This is in contrast with conversion franchises, which do not require any upfront costs. You simply pay a fee when you join the network and then start building your business from there. You could see this when you look up dunkin donuts or mcdonald’s franchise cost.
-
Conversion franchise
A conversion franchise is similar to an investment franchise in that you’re buying into an existing system. However, with a conversion franchise, you don’t own any trademarks or intellectual property as part of your purchase agreement — rather, you acquire an established business that’s already up and running with its own brand recognition and customer base. Conversion franchises can be great for people who want to start their own business but don’t want to reinvent the wheel; they just need help getting started. These types of franchises often offer lower startup costs than investment franchises do because they don’t require as much initial capital investment on your part (though they still have other costs associated with them).
