What Are the Types of Franchises?

By Franchise InformationJuly 22, 2021
What Are the Types of Franchises?

When most people think of franchises, they probably think of fast food restaurants, or maybe oil change shops for cars. The truth is there are several types of franchising—some that may never cross your mind. This is one of many things that makes franchising such a great investment: you have so many options in franchise structure types that you can find one that fits your needs, your investment amount, and the level of involvement you want to have. 

This article will focus on the different types of franchising, with examples, so you can get a better idea of the type of business you can own. 

Types of Franchising

It’s possible to get very specific about the types of franchising, but in general, there are five main types. They share some similarities—there’s usually some kind of licensing fee, allowing the franchisee to use the brand and operate under a wider umbrella—but plenty of differences, too. Some types, as you’ll see, may just provide the brand and let the franchisee work as they see fit, while others provide business plans, marketing assistance, and more. 

Job Franchise

Not every business owner has grand aspirations of turning a small business into a global multi-billion dollar enterprise. They just want to be their own boss, make a good living, and work alone or with a small team. For those types of people, a job franchise is the perfect solution. Job franchises tend to be one of the cheapest franchise options out there, because franchisees are usually just paying small licensing fees and material costs. 

Some job franchise examples include:

  • Lawn care
  • Furniture refurbishment
  • Pool maintenance
  • Cell phone or computer repair

Product Franchise

For franchisees who are particularly sales savvy, there are product franchises. These are heavily sales focused, providing franchisees an opportunity to sell a franchisor’s product or service. They rarely come with a business model—they rely on the franchisee’s business acumen to thrive. And thrive they can, because most product franchises account for more retail revenue than any other franchise model. Of course, they’re also usually reserved for pretty large retail operations that are heavily sales-focused.  

Some product franchise examples include: 

  • Car dealerships
  • Tire retailers
  • Vending machines
  • Appliance retailers

Business Format Franchise

A business format franchise is a prototypical franchise. A franchisee buys into it, and they’re granted a license to operate a business under the franchisor’s brand and provided a full business plan to get them up and running. While business format franchises often provide a wealth of resources, they also tend to expect high standards in return, requiring these businesses to operate within agreements that can have say over everything from pricing to uniforms. 

Some business format franchise examples include: 

  • Fast food restaurants
  • Gyms
  • Real estate agencies
  • Some hotel and motel chains 
  • Consumer goods retailers

Investment Franchise

While a business format franchise may offer a relatively low cost of entry, investment franchises sit on the opposite end of the spectrum. They require much larger upfront fees and, in many cases, higher amounts of investment to get the business off the ground. While there’s a higher risk involved earlier on, there’s also more opportunity due to the size of the business. 

Some investment franchise examples include: 

  • Hotels
  • Restaurant groups

Conversion Franchise   

A conversion franchise takes the above options and flips the point of view. Successful businesses who are looking to grow adopt a conversion franchise model in order to expand easily into other markets, without fronting the expansion costs themselves. Instead, they rely on entrepreneurial spirits who are looking to own their own businesses, and give them an opportunity to grow a successful business in a new location. 

Some conversion franchise examples include: 

  • Real estate agencies
  • Financial services
  • Home services

Three Types of Franchises

The five types of franchising above are specific to business, but if you zoom out, you’ll find an even wider way to look at franchises. They can be categorized into three main areas: 

Traditional Franchises

Simply, traditional franchises are a relationship between a supplier and a dealer. Think job and product franchises from above, where the franchisee is responsible for delivering a product or service supplied under the brand provided by the franchisor. 

Business Franchises

Just as mentioned above, business franchises provide business plans, structures, and guidelines to help franchises operate efficiently, effectively, and—most ideally—at a profit. It’s still a relationship between a supplier and a dealer, but the franchisor is providing an entire business system within which to operate. 

Social Franchises

A bit outside the categories listed above, social franchises are like franchises for good. They provide systems that allow people to easily replicate social good—be it societal change or supplying clean water—in locations across the globe. 

Have you found a type of franchise that has you excited? You can explore your options even further at Franchise.com, and find the exact business that’s right for you, your level of investment, and the role you want to play in the business. We also provide tools that can help you grow and succeed in the franchise business model. 

About the Author - Franchise Information

A Trusted Industry Leader Since 1995. Founded in 1995, Franchise.com was one of the first franchise recruitment websites in the world. Today, we continue to be the 'go to' place for people beginning their business opportunity search and the journey of franchise ownership as well as for those already involved in the world of franchising.
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