So you've done a bit of research and you realize that there are many different types of franchise opportunities out there to invest in. Some are attractive, some not so attractive. So if you're contemplating making an investment by affiliating yourself with a franchise, you need to do your homework and research each type of opportunity to protect against an unsuccessful business. You want to invest in a franchise that will do well, and while learning about each type isn't a sure-fire guarantee that you'll make millions in your first year, it certainly won't do any harm.
Generally franchises can be categorized in two groups. They are known as product and trade name franchising and business format franchising.
Big blue chip companies and industry names in the gas (petroleum), automobile, soft drinks and beverage sectors can usually be found under the product and trade name franchising umbrella. While the big company supplies the merchandise, logo and trademarks, and usually takes responsibility for some or most of the advertising, the franchisee doesn't pay royalties on sales. The franchisee sells the services or products provided by the manufacturer. In general, the franchiser will assist in the set-up and advise on the best locations for the business, and continue supplying goods and things such as vending machines (with all the servicing needed to keep them operating successfully) and whatever else is required to sell products.
Business format franchising, as the name suggests, is a method of doing business and involves services provided to the franchisee. The use of trademarks and logos is integral to the concept of business format franchising. The franchisee assists in the selection of a site, and the franchiser will have a hand in the design and layout of the business.
When some studies suggest that the colors of the walls and seating in fast food restaurants seem to influence how quickly the customers eat, it's not surprising that franchisers are eager to engage with the franchisee at even this most fundamental level. The franchiser will also be involved in training and advertising, even having a say in the preferred philosophy and mindset of its employees.
Some common examples are fast food chains, real estate agencies, convenience stores as well as recruitment agencies.
The franchisee will pay a fee up-front at start-up and continuing royalties in return for continued assistance of the franchiser.
Acquiring a franchise based solely on the brand name will not guarantee your business instant success. You really need to consider which type of franchise suits your personality and interests. Be aware and choose wisely.
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