5 Different Types of Franchises

Various Franchise Categories

Are you thinking about buying a franchise? Fortunately, in the world of franchising, there is something for everyone. There are more than 4,000 franchise brands across over 90 industries in the United States and Canada combined. From low-investment opportunities to large-scale operations with options in between, you have a diverse set of choices if you decide to pursue franchise ownership. 

Franchise Options Explained  

While there are plenty of franchise brands to choose from, they are broadly organized into five categories: 

  1. Job Franchise
  2. Product (Distribution) Franchise 
  3. Business Format Franchise 
  4. Investment Franchise 
  5. Conversion Franchise 

A few of the factors that designate a franchise into a particular category include: 

  • Investment level
  • Franchisor’s strategy
  • Operations 
  • Relationship marketing model 

Job Franchise  

A Job Franchise typically features the following: home-based, one owner with minimal staff, and low-investment. In short, a franchise that falls into the Job Franchise category has a lower barrier to entry. The franchisee can run the business from home and only needs to purchase minimal equipment. Some examples include: 

  • Travel agency 
  • Mobile coffee 
  • Lawn care 
  • Plumbing 
  • Cleaning services 
  • Real estate 
  • Pool maintenance 
  • Corporate event planning 
  • Home inspection 

Product (Distribution) Franchise  

A Product Franchise, which has the highest percentage of total retail sales, represents a supplier-dealer relationship. The franchisor provides the product while the franchisee is given the right to sell that product. In other words, the franchisor licenses its trademark while the franchisee distributes the product within their own business. This is different from most franchise models because the franchisor simply provides the product but does not offer or require the franchisee to use a particular business operating system. Product franchisors generally supply large items such as cars and car parts, vending machines, computers, appliances, and more. Here are a few examples of a Product Franchise: 

  • Exxon
  • GoodYear Tires
  • Ford
  • John Deere 
  • Coca-Cola 
  • Pepsi

Business Format Franchise

A Business Format Franchise, the most common type of franchise, is what you would normally think of when talking about franchising. Under this model, the franchisor provides everything from detailed business operating procedures to ongoing training and support. The franchisee purchases the rights to the brand, but also must adopt the franchise’s business model including operating procedures, services provided, marketing strategies, and more. Examples of this type of franchise include: 

  • Fast-food restaurants 
  • Coffee shops
  • Business services
  • Retail 
  • Personal care 
  • Fitness

Investment Franchise

An Investment Franchise, which requires a management team and a substantial capital investment, is a large scale operation. Generally, the franchisee hires a team to operate the business and is not involved in the business’s day-to-day. The goals are to obtain a return on investment and potentially a capital gain on exit. Examples of an Investment Franchise include: 

  • Hotels
  • Large restaurants 
  • Gyms
  • Grocery chains 

Conversion Franchise  

A Conversion Franchise is similar to a standard franchise relationship, but in this case the franchisee joins their independent business with a franchisor in the same industry. This produces a win-win partnership as the franchisor expands its network while the franchisee reaps the benefits of adopting a well-known brand with its trademarks, marketing programs, training opportunities, critical client service standards, and successful operating procedures. Industries that use the Conversion Franchise process include: 

  • Real estate 
  • Dental and medical clinics
  • Hairdressing
  • Florists
  • Professional services 
  • Home services 

A Different Way to Categorize Types of Franchises  

Here is another way you could categorize all of the various franchises that exist. 

Traditional Franchise – These types of franchises obligate the franchisee to sell a particular product or service in a specific market. Job and Product Franchises fall into this category. 

Business Franchise – These types of franchises involve a franchise business with multiple products and moving parts. Business Format, Investment, and Conversion Franchises fit in this category. 

Social Franchise – This is a newer category that incorporates techniques from Traditional and Business Franchises. The goal is to facilitate governments and nonprofit organizations as they work to effectuate change. A social franchise seeks to promote a social benefit rather than profit, and using a franchise model allows them to develop a replicable system. The types of services a social franchise might provide include:

  • Family planning
  • Maternal and child health services
  • Testing and treating various diseases
  • Education
  • Agriculture
  • Clean water
  • Sanitation    

How to Choose The Right Franchise For You?

Franchising offers a range of opportunities to aspiring business owners with various entry levels. While there are thousands of franchises to choose from, a FranNet franchise consultant can provide the resources and guidance you need to make the best decision. Even better, these services are free to you! Schedule your free consultation today! 

May 11, 2023