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What Are the Different Types of Franchise?

What is it that first springs to mind when you hear the word “franchise”? It could be the name of a very well-known fast food restaurant, the name of your favourite film or video game, or even your favourite American sports team. Already we have begun to see that there are many different types of franchise, but before we look at it any further, let’s first think about what do we mean by “franchise”?

The Oxford dictionary defines the word franchise as:

“An authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities”.

That’s a pretty general and all-encompassing definition, so it’s easy to see how that could embrace activities such as licensing or distributorship arrangements, or acting as an agent or a local branch operation. Whether it’s the NBA or F1 Motor Racing, selling a particular make of car through a dealership network, or serving up fast food, these are all variations on the general theme of franchising.

We could leave it there. However, in the UK, most commonly the term franchise is used to refer to what is known as “business format” franchising. The British Franchise Association (the trade association set up to accredit and regulate franchised businesses in the UK) defines this as:

“Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade as their own business under the brand of the franchisor, following a proven business model. The franchisee also receives a package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis (including a predetermined agreement length, with renewal options).”  Reference http://www.thebfa.org/about-franchising

In the UK, there are nearly 1,000 different brands using this particular format for franchising their business. They will be found in a very wide range of industry/business sectors and each has tailored their business model to enable them to successfully trade and grow their business. If we look at these a bit closer, we can begin to see that each will have a slightly different focus or method of reaching their target market.

Some will be based around the individual owner, perhaps trading from a small industrial unit or from home. Some will operate from a van filled with various goods or consumables for sale, whilst others will have retail premises on the high street. Some will be based on the owner building a team around them to deliver a particular service. The target market might be other business owners, or restricted to residential consumers. Rather than selling goods, some brands will be focused on delivering a professional service come.

So we can begin to build up a picture of the different types of franchise and how these vary from one franchise to another. In terms of format we have,

What about business Franchises?

In terms of the business format, we have,

I hope you can see that, if franchising in general is right for you, the chances are, there is a franchised business model that will work for you. It also shows that the chances of choosing the wrong franchise business are also very real, hence the need for a suitably qualified franchise consultant who can help you assess, evaluate and choose the right franchise for you.