Being your own boss and running your own business is a dream shared by millions of people all over the world. The reality, however, is that for many of these people, knowing where and how to start can be quite difficult. While there are numerous options available for starting a business, buying a franchise is one option that offers greater stability and support than most.
Running a franchise enables you, the franchisee, to use a company’s branding and other helpful resources while selling its products or services. With this definition alone, it’s easy to see why buying a franchise is such an attractive option for many aspiring entrepreneurs looking to get into a small business.
Brief History of Franchising
Franchising as a business model is nothing new. As far back as the middle ages, ancient Chinese commerce featured a distribution model where local titled landowners allowed peasants or serfs to conduct business on their lands.
Naturally, these arrangements were governed by stringent rules, which later became the basis for franchising as we know it.
In North America, Benjamin Franklin is said to have started franchising back in 1731 when he entered into a franchise agreement to run a printing service business in South Carolina. Over the years, franchising has steadily grown, even evolved to becoming a strategic business model that is utilized across almost every industry worldwide.
In fact, the International Franchise Association forecasts the number of franchised businesses in the United States to grow to over 785,000 businesses.
Types of Franchises
Franchising is broad and comprises different models across various industries. If you’re considering buying a new franchise, you should first know which type of franchise you would like to be involved in, as well as the required investment level.
There are five major types of franchising:
1. Business format franchises
This is the most common type of franchise. In business format franchising, individuals buy a business from a credible, established brand. As more and more franchisees come in, the company expands its presence and further cements its brand values.
The franchise company will provide the necessary support to the franchisees throughout the initial stages and all the way through to the actual running of the business. In return for the right to use the franchise company’s branding and expert support, franchisees are required to pay an agreed royalty fee for the duration of the franchise agreement.
An example of a business format franchise model is KFC. You could buy a KFC franchise making you the owner of the business, and you’ll receive ongoing support from the parent company. In return, you will pay regular royalty fees to them.
2. Product franchises
As the name implies, this type of franchise is all about getting a license to distribute the franchisor’s products or services using their branding. The company also provides ongoing support, including access to professionals, exclusive discounts, and even marketing.
In return, the company gets to control how their products or services are handled and distributed by the retail franchisees. They also receive royalty fees.
Product franchising usually requires a much smaller initial investment, making it a great option for first-time business owners and independent contractors. The most famous product distribution franchises are Goodyear Tires, Ford, and other automobile production companies.
3. Manufacturing franchises
In this type of franchise, the franchise company allows the franchisee to manufacture and distribute items using their trademark and brand name. This practice is common in the manufacturing industry, though also quite popular among food and beverage companies.
A good example of manufacturing franchising is when a parent company (franchisor) produces the concentrated syrup needed for soft-drinks. They then sell this syrup along with the branding assets to the franchisees (bottling companies). You didn’t think Coca Cola products came from a single manufacturer, did you?
4. Conversion Franchise
This type of franchise involves the modification of standard franchise relationships. They convert independent businesses in the same industry into franchise units. In turn, franchisees will be provided with a training system, marketing and advertising programs, and trademarks.
As an example, let’s say you’re a self-employed electrician or have an interest in the HVAC space. You could invest in an established franchise offering HVAC services.
This grants you access to a wider customer base, a professional support team, and greater marketing reach— essentially helping you cross from self-employment to full-on business owner. In return, you pay fees to the franchisor and they get to control certain aspects of your business operations.
5. Investment Franchise
Large-scale projects like hotels, restaurants, and senior living facilities are under this type of franchise. As these businesses require large capital investment, the franchisor is usually expected to operate the business and produce a return on investment and capital gain once it generates positive cash flow. Franchisees may also engage their own team to manage or operate the business, with the guidance of the franchisor.
Looking for a franchise in the senior care industry?
Apricus can help you get set up with a senior care franchise, whether in assisted living facilities, home care services, or even full-on luxurious senior living communities. Our team boasts a combined experience in senior living care and management expertise spanning over 100 years. Call us today at 386-256-2015 to discuss your business franchising plans!