What Type of Franchising Format Exist
There are no strict definitions or distinctions between different types of business franchises. The EC Commission, in its study "The Co-operation Between. The Firms in the community: Franchising" (series Commerce and Distribution 1978 No.5), Identified five different types of franchise, namely manufacturer and wholesaler; manufacturer and retailer; wholesaler and retailer; service industry and retailer; undertaking in the same distributive group (the voluntary chain group).
In the Franchise Block Exemption preamble (3) the Commission took a slightly different approach and categorized franchises as industrial distribution and service franchises an industrial distribution and service franchises, These definitions are wide and incorporate more than merely business format franchises (industrial franchises rarely have a business format). They also omit service/processing franchises such as McDonalds and Wimpy which do more than merely sell goods or provide a service.
It is possible to categories franchises by other criteria; for example on the basis of the franchises they attract.
(1) The "ordinary" franchises, under which the franchises is trained by the franchisor and then commences business under the franchisor's name the and guidance. This would include franchises such as Dyno-Rod and Fastframe and allows previously unskilled individuals (or those with different/irrelevant skills) to run their own business. The franchisee's investment can vary from $85,000 (plus $5,000 working capital), for Prontaprint, to $12,500 (plus $4,000 working capital) for Dampcure Woodcure/30
(2) The "conversion" franchise in taken on by franchisees already carrying on the same business as the franchisor. Such franchises tend to, but not always involve special skills, (e.g. hair-dressing) which could not be imparted to ordinary unskilled franchisees. In such circumstances it is the way of doing business and most impotently the name and trade marks in which the franchisees are most interested. A good example of such a franchise is Toni & Guy Hairdressers. It should be noted that any one franchise may attract both franchisees who wish to "convert" and those who have no previous experience of that type of work e.g. estate agencies such as RE/MAX and ERA.
(3) The "Investment" franchise is usually entered in to by a company or syndicate, rather than an individual, as a result of the heavy capital investment (often several million pounds) required by such franchise opportunities. In these cases, the company or syndicate (the franchisee) is more interested in its return on investment, payback period and other financial indicators, than the product granted which the business is actually marketing. The franchise in merely a form of investment for the franchisee. It will have no involvement in the day-to-day running. A profitable return on investment, rather than a day-to-day personal income is the prime objective. The jobs created from this type of franchise can vary from around ten to several hundred at any one outlet. Investment franchises include large restaurants and hotels such as Holiday Inn.
By far the most common franchise opportunities on offer in the UK are the "ordinary" franchises, where the franchisees are in essence purchasing a source of profitable employment.
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