Franchising refers to the method of practicing and using another’s perfected business concept. In a franchise relationship, the franchisee is granted the right to market a product or a service under a marketing plan or a system that uses the trademark, name, logo and advertising owned by the franchisor.
What are the different types of franchising?
Product franchising, also known as trade name franchising, is that type of franchising wherein a manufacturer grants a franchisee the right to sell its products, but with no method of doing business. Examples of this type of franchising are car dealerships and service stations.The business format franchising, also identified as a name and process franchise, features a broader and ongoing relationship between the franchisor and the franchisee, wherein aside from granting the right to use the name and market the products and services of the franchisor, the franchisee is also provided a complete plan for managing and operating the business – a transfer of the proven way of doing business that has been developed by the franchisor. This plan often includes a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing. All of the franchisor’s operating systems, technical expertise, marketing systems, training systems, management methods and essentially all relevant information, are transferred to the franchisee.
With the means of distributing goods and services perfected, rapid expansion of a successful business concept occur more quickly. Modern day franchising is primarily in the business format mode, accounting for around 90% of franchise businesses worldwide. PFA is an association of franchisors who are into business format franchising.