Fransmart helps you buy the correct type of franchise by giving you all the information needed to start a business. Our team will guide you from finding the right franchise to arranging the financing and the grand opening of your preferred location. Contact us to get started building your dream life through franchising
Franchising today is bigger than ever.
A franchise can be defined as the right to use a trademark and sell goods or services under the brand name or service marks of the franchisor. There are many types of franchise organizations in the United States including; product, master franchise, job-franchise, Investment franchise, and more. These organizations have unique characteristics, yet they all fall under the umbrella of “franchise.”
Franchise Industry in the USA
Franchises for retail, food, commercial, home-based, and more are developing in the United States. According to data from the International Franchise Association, there will be more than 26,000 new franchise businesses added within the next five years. This would take the total number of franchise establishments in the United States to 780,188, 6,585 units higher than the pre-covid year.
The GDP contribution of the franchise industry is expected to be around 7%, so it plays a significant part in the American economy.
For many brands, franchising is the best way to expand their business. 80% of restaurants worldwide are franchise-based, which is no surprise considering they can provide capital, expertise, training, and marketing resources to franchisees. Luckily, if you’re in the early stages of your franchise journey, there are many resources you can use to make it easier to franchise.
Dan Rowe, CEO of Fransmart, the top franchising consulting firm for emerging brands, says the coming year will see some restaurant services become more viable in the franchise world. He cites commercial and residential services and quick-service restaurants as franchises that will grow immensely in the current year. He believes that new brands, not mature brands like McDonald’s or Subway are the way for a new franchisee to make money in the franchise industry.
Fransmart has done in-depth research on more than 100 types of franchise brands, and if you are interested in owning a franchise, our team of experts will guide you in your franchising journey and why you should not buy particular franchises.
Fransmart has also made a list of some of the best combinations of financially rewarding and award-winning franchises for the future. Combined with our team’s support, expertise and knowledge these brands offer the best investments for new franchisees. Contact us to see if any of these types of franchises could be the business for you.
What is A Franchise, and Why do People Buy Them?
Franchising is a popular method of doing business to create and expand wealth, gaining momentum over the years at an accelerated rate. A franchise business model involves the legal and contractual relationship between a franchisor and a franchisee. A franchisor is that entity that expands its business by giving rights to individuals to sell its offerings under its brand indicia. On the other hand, a franchisee is an individual who buys a brand’s rights for its entrepreneurial venture in exchange for an agreed fee and royalty.
So why are franchises popular? It’s mainly because owning franchise establishments works very well as independent small business options.
According to the data given by the Small Business Association (SBA), almost 50% of small businesses fail within the first five years. A startup has many risks and challenges that can be hard for a small entity to overcome. Owning a Franchise provides an individual with the entrepreneurial opportunity that has the backing of a large organization and professional know-how to succeed.
For a company that wants to expand, a franchise is an asset-light model that allows faster growth in multiple territories.
Types of Franchise Available in the USA
The franchise business can be classified into types of franchise categories depending on the investment required, its operations, relationship model, marketing, or brand strategy. Finding a suitable type of franchise can be a difficult task. Also, when you decide to buy a franchise, you should know what industry you want to involve yourself in, the time you can give the business, and your involvement and commitment to the work, which will decide the right type of franchise to associate yourself with.
In this article, we will tell you about the commonly categorized types of franchises:
1. Job franchise:
One of the simplest ways to make money through franchises online is a low investment, typically a home-based franchise with a small staff of not more than five people. It is a type of franchise that requires minimum stock, limited equipment, and limited staff to run. Examples of Job franchises are;
- Children Services
- Cleaning services
- Real estate
- Event planning
- Coffee Vans
- Travel Agency
- Pool Maintenance
- Lawn Care
- Cell Phone repairs
2. Business Format franchise:
Business format franchises account for nearly 80% of the 780,000 franchises of America. In this type of franchise, an individual buys and operates the business of an established brand. The franchisee gets to use the franchisor’s trademark along with its operating systems to sell the brand’s product or services. The franchisor also provides training and support to the franchisee to run the business, and in exchange for it, the franchisee has to pay a franchise fee and royalties to the franchisor. Some of the popular Business Format franchises are:
- Fast-food chains like McDonald’s, Halal guys, Taffer’s Tavern, GFG,
- Full-service restaurants like Olive Garden, Golden Corral
- Retail chains like Bath & Body Works, Zara
- Fitness centres like Gold’s Gym, Anytime Fitness
Also, read on how you can secure your business license and permits.
3. Product- Distribution Franchise:
Product franchising is the oldest form of franchising. This franchise model works on the format of a supplier-dealer relationship where the franchisee is the product distributor of the franchisor. Product distribution franchising is mainly used for large products where the franchisor licenses its trademarks but does not fully access the business to the franchisee. In some cases, the franchisor becomes a part of the product’s manufacturing.
In most cases, the franchisee is not charged a fee to distribute the brand’s product; instead, they have to sell a minimum number of brand units.
Some popular Product Franchise businesses are:
- Car & repair parts Like Ford, Exxon
- Large equipment like Caterpillar
- Computers like HP, Dell
- Appliances like LG, Philips
- Beverages like Coca-Cola, Pepsi
- Vending machines
4. Investment Franchise:
Large restaurants and hotels require large-scale investment. In this type of franchise, the franchisee incurs a significant investment in the business and management team. The franchisor may also operate the business for the franchisee.
Some popular Investment franchises are:
- Hotels Like Marriott International, Holiday Inn
- Large restaurants like Darden, Yum China
5. Conversion Franchise:
Not all franchises have to start from scratch. This franchise model works by converting the existing businesses into franchise units. Since the businesses already exist in the market, the companies can expand much more quickly in franchising.
Some popular investment franchises are:
- Real estate brokers
- Air-conditioning services
- Professional service companies
Think you can’t afford a franchise?
6. Management Franchise:
Management franchises focus on the management of a company. The manager may not be a part of the day-to-day working of the business; making this format ideal for individuals with previous managing experience who can pass on their expertise to a team. These individuals may need to work on existing franchises to change their operations for it to be profitable.
Some popular Management Franchise businesses are:
- Parcel delivery
- Fast food chains
- American Idol
7. Manufacturer Franchise:
Manufacturer franchises take on the franchise model to produce and distribute a brand’s product in a particular territory. This model is more prevalent in the food and beverage industry, though it can be used in any manufacturing industry.
Some famous manufacturer’s franchise businesses are:
- Food and beverage companies like Coca Cola, Nestle
- Automobile brands like Hyundai
- Clothing brands
8. Master Franchise:
Master franchises agreements grant a franchise a right to sub-franchise the brand’s outlet in a particular territory. The master franchisee gets exclusive rights to a territory, allowing them to grow a franchise empire.
The Master Franchise provides training and support to the franchisees under it, and for that, it keeps 50% of the franchise fee charged from them.
This agreement is more popular with international franchises. A foreign company benefits from local people who know the country’s laws, language, and customs.
As you’ve learned, there are many types of franchise models available. Our team will guide you to select the right format for you and then help you find the right type of franchise, arrange financing and all the steps needed to get you to the grand opening of your preferred location. Contact us to know more.
Frequently Asked Questions (FAQs)
Q. How Many Types Of Franchises Are There?
There are many types of franchises depending on investment level, brand strategy, operations, marketing, relationship models, etc. Also, while making a decision, you should know what industry you want to involve yourself in, the time you can give the business, and your involvement and commitment to the work. To understand better, read this article.
Q. What Are The Common Franchise Terms?
If you are new to franchising, you will find it difficult to understand industry jargon. These are some of the most common franchise terms: Advertising Fee, Disclosure Document, Royalty Fee, Inhouse Financing, Area Developer, Master Franchisee, Exclusive Territory, Broker, and more. You can easily understand the glossary by reading more about these at Fransmart.
Q. 4 Types Of Franchising?
These are four types of franchising:
- Single Unit- Franchisor grants permission to operate one franchise unit.
- Multi-Unit- Franchisor grants rights to open and operate more than one unit with a determined schedule.
- Area Development- Franchisor grants permission-giving exclusive rights to open more than one unit during a specific time. No one can open branches within a specified area during the contract term.
- Master Franchise- Franchisee has almost the same responsibilities as franchisors. He can sell franchises to other people and also provide training and support. The franchise has to pay the initial fee and royalty to the central franchisor.
Q. What Type Of Franchise Should I Buy?
Before you decide to buy a franchise, you must look into the purchasing accomplishment of this business. Several factors will let you determine the type of franchise you want to buy. Required investment, the time you can give the company, exit strategy, involvement, status, risk factor, and commitment to the work are considerations you should consider before making a decision. Contact us to help you more.