Types of Franchises

Each of the franchises that exist has a large number of differences in relation to their characteristics and the business model they have. When choosing a franchise it is necessary to know what our needs are, what kind of business we want to undertake and how far we are willing to go in the relationship with the franchisors.

Depending on the activity to which the franchises are dedicated, whether the manufacturing or distribution processes are franchised, or the number of franchises owned, we must take into account that there are several types of franchise contracts. Here we can see what they are and their main characteristics.

 Business Franchise
 Depending on the activity  According to the relationship Depending on location
 Industrial franchise Individual franchise Corner franchise
 Distribution Franchise Online Franchise Shop in Shop
 Production franchise Regional franchise Service Franchise
 Multiple franchises Master Franchise
 Service franchise Shareholding
 Mixed franchise

Here you can find the classification of the types of franchises that exist according to the different parameters referred to.

Types of Franchises

Franchises according to the type of activity

Each franchise has different characteristics. Above all in the commercial purpose they have and in the work procedures. Therefore, there are different types of franchises depending on the business model of each of them.

  • Industrial franchise: in these franchises, business agreements are made between the franchisee and the franchisor, since both are industrial. The franchisor usually gives up the right to manufacture its products, the know-how of a part of the production process  (the franchisor usually keeps a part of the process) and the distribution of its products in a certain area.
  • Commercial franchise: it is the classic franchise model, in which the franchisor offers the franchisee all the necessary elements to sell the products and services, so that their business activity increases.
  • Production franchise: it is the franchisor itself that produces the products that the franchisees sell. In this way, a sale of their products is ensured thanks to the purchase by the franchisees.
  • Distribution franchise: also known as a product franchise. The franchisor acts as a purchasing center that acquires all the necessary products and distributes them, since the true distribution to the final customer is carried out by the network of franchisees.
  • Service franchise: in this franchise model, the know-how of the franchisees is transmitted. It is about offering a method or way of working set by the franchisee.
  • Mixed franchise: it is a variant in which the product franchise and service franchise model is mixed.

Franchises according to the franchisee-franchisor relationship

Depending on the number of franchises that the franchisee owns and the importance they have in a certain geographical area, we can distinguish different types of franchises.

  • Individual franchise It is the most typical way in which an entrepreneur acquires a franchise to operate it. That does not rule out the possibility of acquiring more franchises to open other stores within a certain area.
  • Multiple franchise: occurs when the same person owns several franchises of the same brand.
  • Regional franchise: it is also called “area developer” or “area promoter”. In this way, the right to establish a certain number of franchises in a certain geographical area is transferred. It usually occurs when the territory is very large and this type of administration is convenient.
  • Master franchise: through this type of contract, the franchisor exclusively grants the franchisee the right to develop this same process in a specific area or region. In other words, it gives you the possibility of “ sub-franchising ” to other interested entrepreneurs.
  • Shareholding: occurs when one of the parties participates in the shareholding of the other. An example would be when the franchisor owns shares in one of the franchises.

Read Also: What is a franchise?

Franchises depending on the location you own

Sometimes, we find some franchises within other businesses that may be related. In this case we can find several types of franchises depending on their characteristics.

  • Corner franchise these are franchises to be installed in a small space within a particular type of business, but whose activity is related to or complementary to the franchisee‘s product/service.
  • Shop in shop franchise: it is a franchise that is included within another business, camouflaged and recreated with the same decoration, although it is independent of it.
  • Online store franchise: this is a type of franchise based on electronic commerce. It is not necessary to have a physical location since it is only necessary to have the sales platform.

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