A franchise is a business model used in many of today’s industries. Franchise businesses are also called chains. The Small Business Administration explains franchising is when a franchisee sells to a new business owner the use of his licensing trademarks and systems of business.
There are two main formats for a franchise business according to the International Franchise Association: business format franchise and product distribution franchise. The business format model is the most used type of franchise. More than 120 industries use the franchise business model including automotive, lodging, fast food, real estate, and retail products & services.
The first form of franchise business is the business format franchise. For this franchise business model the franchisee sells to the franchisor the ability to use the franchise tradename, products, services, and system for operating the business. The franchisee may offer to the new business owner a full range of services. These services may can include initial training to run the business, operating manuals, marketing assistance, and personnel.
Focus on the product or products that the franchise owns, and distribution of this product is the business model for a product distribution franchise. The product is manufactured by the franchisee and is supplied to the franchisor. Often this type of franchise business model can be found in the bottling, gasoline, automotive and other manufacturing industries.
There are several benefits to owning a franchise business. There is a profitable benefit when the franchise name or their product is already well-known. If the product or trade name has a good reputation there is the basis of a pre-existing customer base. This translates into the ability to draw in new customers much more quickly than if the product or trade name is unknown.
Ongoing support from the franchisee is another benefit of buying into a franchise. The support from the franchise might include anything from the initial set-up of the new franchise business, through helping with the day-to-day running of the business. Other support from the franchise may include toll-free numbers, websites, newsletters, and workshops.
In today’s business market there are many businesses using the franchise model. One of the fastest growing businesses using the franchise business model is the e-cigarette and vapor store franchise market. According to their global market summary report, Researchandmarkets.com states that the global e-cigarette market is expected to surpass $50 billion by 2025. Researchandmarkets.com also states that the e-cigarette market should see staggering growth through 2017.
There are several benefits to owning a business with a franchise business model. A new business that has a preset business model and built-in support system makes it possible for a new business to be set up and running quickly. When the franchise already has a well-known name or product there is a pre-existing customer base. Support from the initial set-up of the new business by the franchisee helps the business owner to navigate the learning curve of owning a new business. This ongoing supports helps the business to grow into a successful part of the franchise.
- 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