Types of
Franchises
There are 5 basic types.
- Product Distribution franchise.
- Business Format franchise.
- Product or Trade Name franchise
- Manufacturing and Production franchise.
- Conversion franchises.
1. Product Distribution
Here the franchisor is usually a manufacturer who sells a product
to the franchise dealer or franchisee. Franchisees are granted the
right to distribute the manufacturer’s product within a
specified area using the manufacturers name and other methods in
exchange for a fee and royalties. A good example of this is a
petrol station.
2. Business Format
Here the franchisor owns and licences out a business format to a
franchisee. The format would consist of operating systems,
trademarks and marketing methods etc. This franchise is where the
Franchisor owns the right to the name or trademark, or system, and
sells that right to a Franchisee to use. The Franchisee would then
set up his/her own operation under more relaxed guidelines and
control by the Franchisor.
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