EVERYTHING FRANCHISING

Should You Own a Traditional Business or a Franchise?

When you decide to start a business of your own, it could be a tough task to choose from the different categories, types and business models available to you. In general, you may either want to start something completely on your own, which we can call a traditional business model or alternately choose to buy a franchise from an existing franchisor. Both these options have their own pros and cons.

EVERYTHING FRANCHISING

Should You Own a Traditional Business or a Franchise?

When you decide to start a business of your own, it could be a tough task to choose from the different categories, types and business models available to you. In general, you may either want to start something completely on your own, which we can call as a traditional business model or alternately choose to buy a franchise from an existing franchisor. Both these options have their own pros and cons.

What is a Franchise?

Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support.

Business Format Franchising

There are two different types of franchising relationships. Business Format Franchising is the type most identifiable to the average person. In a business format franchise relationship, the franchisor provides to the franchisee not just its trade name, products and services, but an entire system for operating the business. The franchisee generally receives site selection and development support, operating manuals, training, brand standards, quality control, a marketing strategy and business advisory support from the franchisor.

More than 120 diverse industries use franchising as their route to market including:

  • Automotive
  • Business Services
  • Commercial and Residential Services
  • Education
  • Lodging
  • Personal Services
  • Quick Service Restaurants (fast food)
  • Real Estate
  • Retail Food
  • Retail Products and Services
  • Senior Care and Medical Services
  • Table/Full Service Restaurants

Traditional or Product Distribution

While less identified with franchising, traditional or product distribution franchising is actually larger in total sales than business format franchising.

In a traditional franchise, the focus is not on the system of doing business, but mainly on the products manufactured or supplied by the franchisor to the franchisee. In most, but not in all situations, the manufactured products generally need pre- and post-sale service as found in the automobile industry.

Examples of traditional or product distribution franchising can be found in the bottling, gasoline, automotive and manufacturing industries.

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