The Different Types of Franchises 

Now that you understand what a franchise is, you might think it’s time to rush out and buy one. Not so fast! There are literally dozens of types of franchises, and thousands on the market. Before you even think about looking for one, you’ll need some background information to guide you through the sometimes, confusing world of franchises. 

Primary Types of Franchises 

There are two main types of franchises: industrial and commercial. Industrial franchises occur when the franchisor is franchising a product, not a business. He or she will likely not offer you the entire process for completing the product. This is the most independent type of franchising because how you sell the product is entirely up to you.

Far more common are commercial franchises. These fall into two main categories: 

·  Goods: The primary goal of this franchise is to market a specific product. In this way it’s similar to industrial franchising, but the business itself will be associated with the product, and there will be a business plan and other such guidelines for you to follow. A fast food restaurant or clothing chain is an example of this sort of franchise. 

·  Services: In this case you aren’t selling a product but a service. You’re banking on the franchisor’s company name to help you market your service. Again, there will be business plans and guidelines for you to follow. A tax office is an example of this sort of franchise. 

Obviously, this will become important during the decision making process. Most people will gravitate towards a commercial franchise, but you will have to decide whether your skill sets match goods or services more closely. 

Methods of Franchising

In addition to the two main types of franchising, there are also four main methods of franchising. By and large, these methods apply mainly to commercial franchises, which are what most beginning franchisees will target. 

1. The Single Unit Franchise

This is the most common method of franchising, and the one most people think of when they hear the word “franchise.” In this method, a franchisee purchases a franchise from a franchisor and is assigned a specific territory. The franchisee then runs the franchise independently but with the franchisor’s assistance within his or her given area. 

2. The Sequential Franchise

Sequential franchising is an outgrowth of single unit franchising. Sequential franchising occurs when a successful franchisee decides to purchase a second franchise location from the same franchisor in another territory. There is theoretically no limit to how many locations a franchisee may own in sequential franchising, but usually each new location is purchased one-at-a-time, both to give the franchisee enough time to focus on establishing the new location and to prove to the franchisor that the franchisee is capable of running multiple businesses.

 3. The Area Franchise

The area franchise is similar to the sequential franchise, except the arrangement is understood at the outset. Rather than buying a single location, the franchisee purchases the rights to an entire area. It is then up to the franchisee to establish locations within that area. Under some contracts, the number of franchises is left to the franchisee’s discretion, but under others the franchisee might be expected to establish a given number of locations in a set time.

4. The Subfranchise

Subranchising occurs when a franchisor selects a franchisee to act as a franchisor for a given area. In other words, the franchisee takes on the responsibilities of a franchisor, finding franchisees, training them, and providing ongoing support in a given area. The franchisee acts as a sort of manager on the franchisor’s behalf, managing all franchises in a given area while answering to the initial franchisor.

Other Types of Franchises to Consider

While these are the main types of franchising and franchising methods, there are other factors to consider when purchasing a franchise. The main one is, what do you enjoy? It’s important to seek out a franchise that caters to your interests. Just a few of the franchise types out there include:

·  Restaurants

·  Clothing chains

·  Gyms

·  Computer services

·  Financial services

·  Real estate firms

·  Shops

·  Animal services (ie, pets)

·  Print and copy services

·  Home-based businesses

·  Marketing consultants

·  Automotive services

·  Cosmetics

·  Educational services

·  Pest control services

·  Employment services  

And many more! The type of franchise you pursue relates to what you enjoy, your skill set, and your abilities. Don’t let yourself be rushed into selecting a franchise that isn’t right for you. Stop to consider: 

·  Time commitments

·  Enjoyment factor

·  Number of employees (if any) required

·  Marketing 

And anything else that applies to your situation. 

As a side note, The International Franchise Association lists over seventy-five categories of franchises. That should give you some idea of the variety of choice out there! Take your time to browse these categories -- this isn’t a decision to undertake lightly.