More than 120 industries use the franchise business format, also called franchising, as their business model. These industries include automotive, lodging, fast food, real estate, and retail products & services. A franchise business defined by the Small Business Administration is a business model where a franchise sells to a new business owner the right to use the licensing trademarks and methods of the franchise business. The franchise business format is often referred to as chains or store chains.
The International Franchise Association explains there are two formats for a franchise business: the business format franchise and the product distribution franchise, also called a traditional franchise. The business format franchise model is the most common format used in a franchise business.
The business format franchise model establishes an ongoing relationship between the franchise and the new franchise branch business owner. The franchisee, the main franchise company, sells to the franchisor, the new franchise branch business owner, the ability to use the tradename, products, services, and the system for operating the franchise business. The main branch of the franchise offers the new business owner various business services associated with the franchise. These services will vary depending on the franchise, and may include assistance with site selection for the new franchise business, training, products, marketing, and possible assistance with obtaining financing.
The product distribution franchise format is based on the product that the franchise manufactures and supplies to the franchise businesses. This type of franchise model is often used in the bottling, gasoline, automotive and other manufacturing industries.
Benefits of buying into a franchise business model are the use of the trade name, products and the ongoing support from the main franchise business. If the franchise has a well-known product or trade name with a good reputation this increases the ability to draw in new customers more quickly than if the product or trade name is new and unknown.
Ongoing support from the main franchise to the new franchise business is another benefit of buying into a franchise. The services offered to the new franchise business vary depending on what the franchise business format offers. Some of the services given to the new franchise business may include initial assistance with finding a location for the new business, initial step-up, training, operating manuals, and marketing tools. The support may also include newsletters, toll free numbers, websites, workshops and seminars.
The franchise business format works for many different types of businesses. One of the fastest growing businesses with a franchise format is the vapor store franchise market. The e-cigarette market is expected to grow to over $50 billion by 2025 and will see a staggering growth through 2017, according to the global market summary by Researchandmarkets.com.
A franchise business format with a well-known trade name or product will generally have a built-in customer base. The business format model of franchising offers a preset business model and built-in support system. These benefits of buying into a franchise business model enables a new business to quickly be set-up and running.
- Small Business Administration. “Franchise Businesses.”
28 March 2016
- International Franchise Association. “What is Franchising”
30 March 2016
- Researchandmarkets.com. “Global E-cigarettes & Vaporizer Market Analysis & Forecast Through 2015 to 2025” Summary.
30 March 2016