Are There Different Kinds of Franchises?

The two main kinds are franchises of a business format and of distribution of products.

The franchises of the first kind are prevalent globally. Under those the franchisee not only gets to use the logo of the franchisor but avails himself of the franchisor’s specific system of business management.  Clients are familiar with the KFC brand and expect its products to be the same everywhere regardless of the ownership of individual franchises. This is achieved by strictly following the procedures described in the Operations Handbook of the specific enterprise. Different franchise chains use a wide variety of operational management techniques but they all share a reliance on detailed requirements to ensure the maintenance of uniform standards of goods and services.

Unlike business format franchises those that deal in the distribution of products and services are not dependent on a strict system of organizing business. Here franchisees merely distribute the franchisor-manufactured products: cars, fuels, drinks, etc. Despite being fewer in number (only about 20 per cent of franchises in the US are distribution ones) they generate greater revenues than business format franchises. They also require greater outlays. Sometimes they may even involve the manufacturing or assembly of the products they are going to distribute, i.e. the franchisees of Coca-Cola manufacture, bottle and distribute its products. Distribution franchises are close to traditional methods of distribution – dealerships, official representation etc. but unlike traditional distributors franchise ones are limited to offering the products of their franchisor. In exchange for that they get a lot of support – training, free advertising etc.