If you’re considering entering the franchise market – either by franchising your own business or by buying into a franchise – you’ve no doubt come across the terms ‘business format franchise’ and ‘product distribution franchise’. Confused? Read on…
What is a Product Distribution Franchise?
Product Distribution Franchises distribute a parent company’s goods. Franchisees have the right to the brand name (trademark and logo) and to the right to distribute the product(s) but generally have greater control over how they run their business. The types of businesses which opt for this franchise model are auto dealerships, service stations and soft drink vendors.
What is a Business Format Franchise?
In addition to the brand name and the right to distribute products or provide services, the franchisee also gets a complete business package necessary to operate the business, i.e. a business model is set out for the franchisor which covers everything from branding, to recruiting and hiring staff, to financial controls and marketing and advertising guidelines. The types of businesses which follow this franchise model include hotel chains, fast food franchises and services franchises (like beauty franchises or cleaning franchises).