Franchising Basics: Types of Franchises

Franchise Information

Many entrepreneurs enter into franchise contracts as a way to manage the risks involved with starting a business. Potential franchisees are usually looking to run their own business while increasing their chances of success.

Franchising is a great alternative to starting from scratch because it can offer entrepreneurs access to experienced professionals, an automatic position in the marketplace, operational cost savings and a large network of peer franchisees.

There are two basic types of franchises.

Product/ trade name Franchise:

Franchisees purchase the right to sell a product or to use a trade name. The franchiser does not typically offer support which allows the franchisee to operate as an independent business person. Franchisees are essentially distributors for the product manufacturer.

As a product/ trade name franchisee, you have the opportunity to combine business ownership with the benefits of an established business model including access to franchise wide marketing efforts, national brand recognition and brand reputation.

Examples: Brand name stores, automotive dealerships, gasoline stations, beverage bottling companies.

Business Format Franchise:

When a franchisee purchases a business format franchise they receive access to the total business system. The benefits include training in marketing, sales, accounting, company standards, economies of scale benefits, expert advice and guidance and geographic territory rights.

Essentially, the franchisee receives detailed instructions for duplicating a tested business model. The franchiser provides training and guidance at start-up and throughout business ownership.

Choose a format then add hard work

 While franchising helps reduce risks and increases the chance of success and longevity of the business, seeing positive results takes dedication, long hours, hard work and a deep desire to see the business do well.

 For more information Click Here: To read " Raising Entrepreneurial Capital" by John B. Vinturella and Suzanne M. Erickson.

Franchising: Concept Testing vs. Natural Expansion

 Concept Testing an Expandable Business

When I walked into Rickshaw Dumpling Bar in New York City for the first time I was convinced that I was walking into a franchise location. The simple red logo was printed on the napkins, the windows, the take out boxes and the cups. The interior design was simple and clean and the palette was mainly red, white and silver. The circulation optimized space for moving hungry business people in and out as fast as possible and the menu, displayed in simple print over the cash register was easy to read.

To my surprise, I discovered the only Rickshaw locations were the one I was standing in and a Dumpling Truck that travels the streets of NYC.

As I spent the next six weeks walking the streets of New York I noticed many other businesses which looked and felt like a franchise were actually single location restaurants primed for expansion. 

It seems the model for franchising is changing.

In the past businesses decided to franchise after experiencing a certain level of success. After a working business model and reputation had been established, business owners would either look for additional locations to run themselves or to license their trade name to another owner.

Now, it seems that many businesses are developing the primary location as a way to test a concept for mass production. 

Instead of starting as a "mom and pop" shop and expanding organically, the concept testing model does a few things differently from the start.

The business concept, the branding capabilities and the potential for customer loyalty are carefully planned  for reproduction.

A Marketable Logo: An easily recognizable logo is produced by a professional graphic designer which allows customers to identify the brand as it expands.

The Flow and Feel:  It is important to create a unique and comfortable layout which optimizes efficiency and accessibility. The design must be created with duplication in mind.

Interior Design: The potential to achieve economies of scale must be considered when choosing each aspect of the business including colors, fixtures, supplies and furniture.

What do you think of the idea of concept testing vs. natural expansion to franchising?

 

Franchising: Small Business Opportunity

Franchising Introduction

So you're interested in opening a franchise of your favorite business and you are looking for some answers? Below are some definitions to get your franchising feet wet.

The Basics

 What is 'franchising'?

     The concept of franchising started naturally as one business owner saw an opportunity to expand his own successful business beyond his geographical region by lending his business model and trademarks to another qualified entrepreneur. This allowed the franchisee to adopt the name and original reputation for quality, value and service while offering a great product to a larger number of people.

What are the benefits if I become a franchisee?

  There are many benefits of opening a franchise. The most popular reasons to adopt a franchise business model are the use of their reputation, national branding campaigns and access to a support system as well as reduced investment risks.

  In exchange for start up and royalty fees, a franchiser offers a complete business model, commitment to building the brand, education and training, operational support and leveraged buying power.

•  The U.S. Dept of Commerce states that 90% of franchises are still in operation after 10 years, compared to just 18% for other forms of small businesses.
• A recent Gallup Poll of franchisees found that more than 94% considered themselves successful, and that more than 75% would buy their franchise again if they had to do it over.

For more information on franchising contact the U.S Small Business Association, a government run agency, which exists "to to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation." Click Here to visit the SBA website for more information on franchising.