Understanding the Types of Franchises
Oct. 19, 2022
The United States is the worldwide mover in the franchise industry, with 18 of the world’s top 20 franchises headquartered here. Indeed, it’s hard to travel anywhere in the world and not find McDonald’s, 7-Eleven, KFC, or other familiar American brands.
According to the U.S. Census Bureau, about 300 different industries offer franchises, with some 750,000 franchise establishments stretching from coast to coast and into Hawaii and Alaska. These franchises employ about 8 million people and account for about 3 percent of U.S. GDP (gross domestic product) with some $790 billion-plus in annual economic output. Franchises are so popular that a new one opens every eight minutes in the U.S.
The lure of a franchise is multifold. However, truth be told, not every franchise involves letting a newbie erect Golden Arches and open their doors to throngs of hungry customers. In fact, many franchises fly completely under the radar. A full-service food or retail operation is just one of five recognized categories of franchises available to the investor. Some franchises even allow for home- or mobile-based operations.
If you’re looking to enter the franchise industry in or around Seattle, Washington—or anywhere in the United States, including Oregon, Texas, and Florida—contact the franchise attorneys at Bundy & Fichter PLLC. Their knowledge of franchise law, along with four decades of experience helping franchisees navigate a sea of compliance concerns, help the firm stand out as a top resource in franchise issues. Get in touch today for an initial consultation.
Advantages of a Franchise
The bottom line with any franchise opportunity is that you, as a potential franchisee, won’t have to reinvent the wheel to get people to use your services. Someone has already developed a concept and a business model that has a proven track record. By becoming a franchisee, you can step into a business that, generally speaking, already has the fundamentals in place—name, concept, image, operating protocols, and marketing and advertising best practices—and will train you on how to replicate the success that the original franchise owner and others have enjoyed.
Types of Franchises Available
Hearing the word “franchise,” the average person probably envisions those famous Golden Arches and equates the franchise concept itself to that of fast-food operations. In fact, Subway with 44,758 outlets, and McDonald’s with 36,525 franchises (many being corporate-owned) top the list of the most franchised businesses in the world.
Moving past the image of McDonald’s and Subway, two ubiquitous and profitable franchises, there are other variations of the franchise concept that are both available and viable. The five most common types of franchises, including fast-food and retail outlets, are:
THE JOB FRANCHISE: This is a low-investment, often a home-based, franchise. There is usually a franchise fee and then some start-up costs involved, such as purchasing equipment and supplies, and sometimes a vehicle. Examples include cleaning and pool services, cell phone repairs, plumbing and HVAC, travel agency or similar services, and landscaping and gardening.
THE PRODUCT FRANCHISE: Here, the focus is on spreading the availability of a product rather than on providing a full-service franchise operation. Franchisees are largely product dealers and distributors, such as those offering car parts, computers, appliances, bicycles, and even vending machines. The franchisee gets to use any trademarks or logos associated with the product.
THE BUSINESS FORMAT FRANCHISE: Here is where McDonald’s, KFC, retail operations, and fitness chains come into focus. As a franchisee, you are required to operate under the parent’s name and trademark (to which you are granted rights) and duplicate the parent’s operations and products and services offered. Toward these goals, you will be thoroughly trained. However, entry fees and ongoing royalties may be higher than in other franchise opportunities.
THE INVESTMENT FRANCHISE: As the name implies, this type of franchise usually requires a substantial up-front investment, since the franchise is generally for a hotel or full-service restaurant. Examples include Comfort Inn, Days Inn, Holiday Inn Express, and larger restaurant chains. The purpose of an investment franchise is for the franchisee to earn a return on their investment, and the investor may even franchise the particular location to someone else to operate.
THE CONVERSION FRANCHISE: This is sort of a hybrid concept, wherein the franchisee enters into a relationship with an existing company and converts it into a franchise opportunity. The franchisee relies on the other company’s brand, trademarks, marketing and advertising, training, and client service protocols to build their own operation. Examples include florists, electricians, professional service providers, and even plumbers and HVAC services.
Trusted Guidance Every Step of the Way
Owning and operating a franchise may be just the opportunity you’re seeking, but you need to do your homework. Attend trade shows and business events where you can speak with other franchisees. Check the franchisor’s online reputation. Survey your own strengths and weaknesses to determine which type of franchise is best for you. Most importantly, consult with a franchise lawyer.
The franchise attorneys at Bundy & Fichter PLLC stand ready to help you with every step of finding and operating a franchise. You need to make sure you have the proper legal protections in place when you sign the dotted line, so be sure to have a trusted law firm review every document presented to you. As you proceed to open and run your franchise, there will inevitably arise questions, concerns, and even disputes. The attorneys at Bundy & Fichter PLLC will be there for you in these situations as well. Get started by setting up a one-on-one consultation.