According to the Small Business Administration franchising as a business model is when a business owner of a franchise sells to an independent entrepreneur the use of the licensing trademark and methods of business of the franchise. Franchise business are also often called chains or store chains.
The International Franchise Association explains there are two main business models for franchising businesses: business format franchising and product distribution franchising. Product distribution franchising is sometimes referred to as traditional franchising. Between the two types of franchising models, the business format franchising model is the most commonly used. There are more than 120 industries in business today using the franchise format. These industries include automotive, lodging, fast food, real estate, and retail products & services.
The model for the business format franchise includes the franchisee selling to the franchisor the use of the trade name, products, services, and entire system for operating the franchise business. There is a continuous business relationship between the franchisee and the franchisor in this franchise business model. The franchisee offers to the new business owner a full range of services to assist with the franchise business. Each franchise may offer different services to the franchisor. Some of the services the franchisee may offer to the franchisor include selecting a site for the new franchise business, initial training, seminars, workshops, personnel, product, marketing plans, and financing assistance. Some of the day-to-day services offered to the new franchise business may include newsletters, toll free numbers, and websites.
The product distribution franchise format is the less commonly used franchise format. The focus of the product distribution franchise is the main product of the franchise. The franchisee manufactures and supplies the product to the franchisor to sell. This type of franchise model can be found in the bottling, gasoline, automotive and other manufacturing industries.
The trade name of the franchise or its product may be one of the main benefits of buying into a franchise business. A franchise with a well-known trade name or product with a good reputation will often have a strong pre-existing customer base. This increases the ability to draw in new customers much more quickly than if the product or trade name is unknown.
One of the fastest growing franchises in today’s business environment is the vapor store franchises. As the Researchandmarkets.com global market summary states, the global e-cigarette market is expected have a growth rate of over $50 billion by 2025. The e-cigarette market is expected to see a staggering growth rate through 2017.
Buying into a franchise business offers a new business owner a preset business model and built-in support system. This can enable the new business owner to be able to set-up and begin running his business quickly. Buying into a franchise with a well-known trade name or product will be a benefit with a pre-existing customer base. With Ongoing support from the franchisee, the new franchise business owner can navigate the steps of owning a new business and grow the business into a successful franchise business venture.
- Small Business Administration. “Franchise Businesses.”
28 March 2016
- International Franchise Association. “What is Franchising”
30 March 2016
- Researchandmarkets.com. “Global E-cigarettes & Vaporizer Market Analysis & Forecast Through 2015 to 2025” Summary.
30 March 2016