A business format franchise is a franchising arrangement where the franchisor provides the franchisee with an established

business, including name and trademark, for the franchisee to run independently.
A product franchise is a franchising agreement where manufacturers allow retailers to distribute products and use names
and trademarks.
A manufacturing franchise is a franchising agreement where the franchisor allows a manufacturer to produce and sell
products using its name and trademark.
franchise
The authorization granted by a company to sell or distribute its goods or services in a certain area.
EXAMPLE[ edit ]
Generally, The Coca Cola Company only produces syrup concentrate. This is then sold to bottlers around the world, who
finish the product by adding water and distributing it to retail stores, restaurants, and food service distributors.
Types of Franchises
While there are many ways to differentiate between different types of franchises (size, geographic location, etc), we will be
looking at how different franchisors allow franchisees to use their name. On this basis, there are three different types of
franchise:
Business format franchises
Product franchises
Manufacturing franchises
Business Format Franchises
In business format franchises (which are the most common type), a company expands by supplying independent business
owners with an established business, including its name and trademark. The franchiser company generally assists the
independent owners considerably in launching and running their businesses. In return, the business owners pay fees
and royalties. In most cases, the franchisee also buyssupplies from the franchiser. Fast food restaurants
are good examples of this type of franchise. Prominent examples include McDonalds , Burger King, and Pizza Hut.

Product Franchises
With product franchises, manufactures control how retail stores distribute their products. Through this kind of agreement,
manufacturers allow retailers to distribute their products and to use their names and trademarks. To obtain these rights,
store owners must pay fees or buy a minimum amount of products. Tire stores, for example, operate under this kind
of franchise agreement.
Manufacturing Franchises
Through manufacturing franchises, a franchiser grants a manufacturer the right to produce and sell goods using its name
and trademark. This type of franchise is common among food and beverage companies. For example, soft drink bottlers
often obtain franchise rights from soft drink companies to produce, bottle, and distribute soft drinks. The major soft drink
companies also sell the supplies to the regional manufacturing franchises. In the case of Coca Cola, for example, Coca
Cola sells the syrup concentrate to a bottling company, who mixes these ingredients with water and bottles the product,
and sells it on.

Source: Boundless. Types of Franchises. Boundless Business Boundless, 26 May. 2016. Retrieved 04 Jan. 2017

from https://www.boundless.com/business/textbooks/boundless-business-textbook/types-of-business-ownership6/franchising-52/types-of-franchises-257-1725/
DIFFERENT TYPES OF FRANCHISES BUSINESS
September 20, 2013Franchise Operationstfbadmin
Fundamentally there are two types of franchises. They are Product distribution franchisesand Business format franchises.
The most significant portion of the product distribution format is that the product itself is manufactured by the franchisor.
Many times some sort of pre-sell preparation is necessary on the franchisee end before their sale.
One more important difference between these two types is that in product distribution type of franchises, the franchisor
licenses their logo and trademark to the franchisees however he/she does not provide the complete system necessary to
run the business successfully. However in the business format type the total system is supplied by the franchisor for
running the business. Nowadays most of the franchises are of the type business format franchises.
If you look at United States, almost 80% of the totals of 770,000 franchise businesses are of the business format franchise
type. Lets have a close look at these two types of franchises.
Product Distribution Franchises: In this type of franchises, the franchisees sell manufactured products to the franchisor.
This type of business can often be found in industries such as automobile, drinks and automobile accessories. These
franchises are similar to the supplier-dealer kind of relationships. However in the product distribution franchises,
franchisee has the benefit of getting more services from franchisor than compared to what dealers will get from their
suppliers.
Business format franchises: In this type of franchises, the franchisee makes use of franchisors brand name and also his
trademark. And more significantly, the franchisee gets to use the complete business system of the franchisor. This type of
format is helpful in achieving consistency that gives results in form of sustained success. In this type of structure the
franchisee is empowered with a detail plan that details almost all things related to operation of the franchise. In this type
the franchise is provided training about things such as advertising and marketing of the franchise, management of the
premises, recruitment and training of staff, greeting new and old customers and all other things related to the operation of
the franchise.
Remember, both the types have their pros and cons to consider. It is only hard work andhealthy interest in your business
that can guarantee success of the business. The use of franchise method has risen significantly in recent times. You may
also use franchise management software in order to make your experience successful.
This software simplifies the nature of running a franchisor model of business. Good franchise software provides features
such as corporate communications, new store management, data collection, administration and marketing management.
This makes your life a lot easier.
With a range of home based business ideas on the market, finding the right one that will allow you to earn extra money at
a time when you most need it.
By: SlaterB http://rawbusinesslaw.com
aving a strong marketing message is important, but it's meaningless unless you have an audience to whom you can
deliver the message.
Lets start with a basic premise. Franchise sales rarely happen by accident. And while an occasional serious prospect may
just wander in your door, most franchises are sold because a franchisor executes against a marketing plan designed to
attract that prospect. Here's what yours should include:
1. Budget.
The first step in creating your franchise marketing plan involves setting a budget. And defining an appropriate budget is
almost always a balancing act between goals and available resources.

The best way to develop your growth strategy is to set a long-term goal (exit, business value, cash flow, etc.) and time
frame (five years), translate that goal into a hypothetical business that can achieve it (100 franchises paying $30,000 a
year in royalties, for example), and work backward to a more specific short-term objective (selling 12 franchises in the first
year).
After creating growth goals using these kinds of measures, your franchise marketing budget can be developed based on
industry averages. The annual franchise marketing budget can be arrived at simply by multiplying the desired number of
franchises to be sold by the assumed marketing cost per franchise.
If after completing this analysis you determine the plan is too aggressive or the required capital isn't available, you have
several choices:
Reduce the short-term goals (e.g., try to sell six franchises in the first year and more in later years)
Lengthen the time frame for achieving the goals
Bring in outside capital (and increase goals to offset the effect of equity dilution)
Alter the strategic approach to incorporate more aggressive tactics (e.g., plan simultaneous development of companyowned units, include an area development or area representative option)
2. Narrowing your market.
One of the most effective ways to improve your franchise marketing is to narrow your prospect profile. If your target
franchise audience comprises the entire universe of franchise buyers, you'll be forced to use a very general message to
attract them. More important, you'll likely need to advertise in general business or franchise publications, where you will be
competing with many additional franchise opportunities.
Competing with other franchisors head to head is part of the business, but startup franchises will find lead generation
more difficult. It helps to narrow the scope of your franchise prospects, narrow the focus of your message, and advertise in
media that are less saturated with franchise competitors.
While intuition can provide you with a starting point, the best marketers supplement their intuition with primary research. In
franchising, this research can be surprisingly simple. In addition to working with consultants (who have access to this
research), you can do your own by speaking to franchisees of similar brands or by going to industry trade associations
and speaking to other franchisors. Franchisees are often happy to tell you about themselves and their buying decisions,
as they're accustomed to fielding phone calls from potential franchisees on the same subjects.
3. The marketing funnel.
While it's almost a clich, it's worth restating here: Sales is a numbers game. The more money you spend on franchise
marketing, the more franchises you'll sell. Franchise marketing dollars generate leads. A percentage of those leads fill out
applications. A percentage of those will come in for meetings. And a percentage of those meetings will turn into franchise
sales.
Of course, it is a little more complex than that. To understand the process better, the iFranchise Group developed a
paradigm called the Franchise Sales Funnel. This sales funnel can help you analyze the effectiveness of current
marketing efforts as well as identify areas for potential improvement.
From highest cost-per-lead to lowest, you'll generate franchise sales leads from public relations, print media, trade shows,
direct mail, the internet, brokers (who provide leads for free but take referral fees when the franchise sells), and referrals.
Not only do each of these lead sources have different associated costs for a lead, but each will have their own associated
close rates:
Leads from brokers, which are pre-qualified, will close at the highest rates.
Public relations and referral leads will close at the next highest rates.

Print media and trade show leads will close at about an average rate.
Leads from the internet will generally have the lowest close rates.
But this only tells part of the story. Each of the lead sources has its own anticipated cost-per-lead, and each has a varying
level of effectiveness. Public relations, for example, while providing extremely valuable leads, supplies them at a lower
level of consistency than will the internetwhich can deliver numerous lower-quality leads with great regularity.
So as much as you'd like to get all your leads from public relations, referrals, and brokers, you'll likely need a mix of most
of the above if you hope to sell franchises with any degree of predictability.
In general, you can anticipate:
Lead costs of between $50 and $150
About 13.5 percent of those filling out your confidential information request form (CIRF) to convert to a sale
Overall close rates of about 2 percent of all inquiries
A time-to-close of about 12 to 14 weeks (longer when you first get started to account for the need to fill your sales
pipeline)
The good news is, the more money you pour down the top of the funnel, the more franchises will come out the bottom.
The bad news, of course, is that it's somewhat expensive (estimated at about $8,000 in 2014) to generate enough leads
to sell a single franchise.
4. Timing.
In developing your franchise marketing plan, you should be aware that timing will play a major role. For franchisors that
don't have major issues with seasonality, the franchise marketing budget can be optimized by spending advertising dollars
more aggressively at certain times of the year.
Generally speaking, franchise buyers go into hibernation in November and December. At that time of year, people are
preoccupied with the holidays and are less concerned with making life-altering decisions. Likewise, there is a period in the
heart of summer, when prospective franchisees are more focused on family time and vacations than they are with buying
a business.
By contrast, January through March is prime lead-generation season for most franchisors. When January comes, it's time
for New Years resolutions and reflecting on where our lives have taken us. Moreover, the franchise buying process
always starts with somethinga bonus, the lack of a bonus, the lack of a raise, a bad review, a layoff -- and the beginning
of the year is often filled with those special somethings.
The spring and fall tend to bring relatively average franchise buying activity. But bear in mind that it takes about 12 weeks
to close the average franchise sale, so factor that in when determining the timing of your ad spend.
The more complicated situation, of course, occurs when you are selling a franchise that is itself highly seasonal. If the
seasonality of a business is profound, savvy franchisors probably won't want to have franchisees opening their doors in
the beginning or the middle of the season (when they might be overwhelmed) or at the end of the season (when they
might struggle until the following season). Instead, franchisors would be well-advised to have franchisees open at a
strategic interval prior to the opening of the season.
To accomplish this, the seasonal franchisor should start with the ideal opening time and work backwards into its franchise
advertising high season. In a retail environment, that might mean working backwards from the grand opening through
build-out through site selection through training through the sales process.
Of course, none of these are hard-and-fast rules. Franchisees for most systems can be recruited throughout the year, and
openings for almost any business can be accommodated out of season -- as long as the franchisee is adequately
prepared (financially or operationally) for the implications of this counter-seasonal opening.

Growing a franchise can be hard work. You have to think about corporate sales and marketing, as well as providing for the
franchisees. It looks something like this:
Corporate marketing programs.
Corporate marketing programs for franchisees.
Additional marketing programs offered through corporate for the franchises.
Each of these initiatives takes a lot of work -- and you cant do just one. The thing is, they all work together. You need to
have corporate marketing to attract franchises and grow the size of the brand. You need to have marketing for the
franchisees because if they are not successful, neither are you. It will also be hard to attract more franchises if your
current ones are going under and not profitable. The additional marketing programs also help a lot. In some cases, you
will have an owner who owns multiple shops or just one that wants to be a big spender. If corporate offers these programs
through vendors, they get to have some control, provide more value to the owners and help grow the size of the brand.
Related: The 4 Essential Elements of a Franchise Marketing Plan
In this post, we will talk about franchise marketing. Specifically, how you can set it up to attract franchisees and boost the
credibility of corporate.
Corporate marketing programs.
When I say corporate marketing, I mean marketing just from thebusiness-to-business perspective. Basically, we are trying
to attract more franchisees to the franchise. Here are some of the things to consider.
Have a location-based strategy. Almost all franchises have some kind of location element. That means all of your
marketing strategy should be tied to location. On the corporate level, youll want to focus your efforts on the regions that
you are trying to build out first. For example, you may start in Southern California, expand to Northern California and then
to Arizona. When you do this, you need a good mix of online and offline marketing to build the brand and take the location
by storm. Consider the following:
Local SEO
Local Google AdWords
Yelp ads
Yellow pages
Local directories
Microsites or landing pages (there is a lot to know about this one)
Local content marketing
Social media ads and social media marketing
Radio advertising
Buy billboards in the area
Sponsor sports teams in the area
TV in the area
Direct mail
Try to set up a pipeline for your franchisees

One of the main draws to any franchise is that there will be demand for business due to the brand credibility in the
consumers eyes. The idea is that the franchise is so established that when you buy it, the customers will automatically
come. Now in some cases, franchises take this a step further and actually deliver business to the franchisees. For
example, I have some corporate franchise clients who literally send business to the owners.
Either way, corporate should be working to establish a pipeline for the owners. It makes the business much more
attractive and keeps things positive.
Get on lists. Large business sites such as Entrepreneur have lists of franchise opportunities. In addition, people are
constantly writing on the topic. Many of these lists are industry-specific, and will often state the best franchises to own at
any given time. As part of the franchise-marketing strategy, it is a great idea to get on these lists. People read them often
and they can drive a lot of business.
Get them into a funnel. People research franchise options heavily before purchasing one. There are a lot of options, price
points, business models, set-up costs In general, there is just a lot to this type of business. One of the most important
things you can do is get them into a funnel. Now, this can be some type of drip campaign using a tool like Infusionsoft or
just a basic MailChimp email newsletter. Either way, you need to stay on their radar after you have captured their email
and other actionable information. While they might download your information packet at first, they might soon forget the
franchise if this is not put in place. Keep in mind that getting them to be a part of your social communities or follow your
blog can also accomplish this.
Make your brand glow. Not all of the marketing needs to be direct response. Keep in mind that people need to really like
the brand. They need to feel as though the franchise is greater than their current business. Or if they dont have a
business, that it is a great opportunity and surefire win in general. Invest in great creative, a nice website and plenty
of positive marketing to make people proud to invest in a franchise.
Have a strategy to target similar businesses. This is different for every type of franchise, but one of the main ways some
franchises acquire new franchisees is by going into a non-franchises business and doing a presentation about why they
should switch over. This demands a great deck, plenty of supplementary marketing materials and a sales team. If done
right, it is one of the most effective strategies for acquiring new franchisees.
Related: What Franchisees Need to Know About Digital Marketing (Infographic)
Corporate marketing program for franchisees.
Outside of doing marketing to acquire franchisees and build the brand, it is also a good idea to have marketing services
on the franchise level. Generally, this will be a budget of $150 to $2,000 a month per franchise (of course it all depends on
the franchise and the needs), and it will be highly targeted to the individual location. If possible, there should be one
standard package and other larger packages which franchisees can contract directly for.
You will need a baseline program. The baseline program should be provided by the franchise, but it can come out of a
franchise fund. Generally, franchises will vote on a marketing program and budget at annual meetings. This would then
get allocated to these program.
The program should be location specific. The baseline program needs to be very location specific. If it is online that is a
given, but if there are offline elements, such as billboard or radio, that also needs to be very targeted. Direct mail also
needs to be highly local. The most important thing is to ensure you are delivering in the right markets based on the level of
franchisees you have there.
You should have options to upgrade. When creating the options to upgrade, you want to make sure they are all somewhat
affordable for the franchisees. Options should then be priced in a general range that makes sense across the board
versus pricing differently per region.
Its a good idea to work with an agency who has experience. To build out this type of system internally is very tough.
Especially if you are a new franchise with a small team. You need expert and experienced personnel. In most cases, it is a
good idea to bring on an agency with heavy local advertising experience and of course franchise experience.

Related: The Best and Worst Franchise Marketing Campaigns of 2015

Issues of which to be aware.
Two of the largest issues are communication and reporting. It is critical to be able to create a lot of reports, send them to
franchises and have them be able to interpret it correctly. It is also important to have an open line of communication and
excellent customer service. Without it, the value might not be fully understood. Marketing can get pretty complicated,
especially digital marketing, so things like webinars and presentations are key to ensure there is ample understanding
across all parties.
Additional marketing programs.
Some franchisees will only own one or two franchises, but other will own five, 10 or more. When this is the case, the
franchisee will most likely consider their franchises as their own business. A franchise needs to have an agency they can
trust to provide custom solutions to these type of owners. Make sure you have a solution for them that is dependable and
can get them the results they are looking for.
Summing up franchise marketing.
If you are looking to attract franchisees, you need to have a clear andprofitable model, a strong case for making the
investment and serious brand credibility. If you do a great job with your franchise marketing, you will be well on your well
to attracting new owners.