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Franchising involves a business owner granting others the right to use their established business model and brand identity. The franchising model can be flexible and a possibly lucrative endeavour. However, if you are interested in franchising, it is essential to consider whether franchising is the right way to grow your business. This article will explain which types of businesses are franchisable and the ideal qualities your business should have before franchising.
Is There a Right ‘Type’ of Business for Franchising?
There is no particular type of business that suits franchising more than others. However, some businesses are better prepared than others and contain qualities that can increase the franchise’s success.
Each type of franchised business belongs to one of three categories. The following table explains these categories.
| Type | Explanation |
| Product distribution franchise | The franchisee obtains the right to distribute or sell the franchisor’s products to customers. Generally, with this franchise model, the franchisee operates under their branding, not the franchisor’s. The difference between product franchising and regular supplier contracts is that the franchisee will often only stock the franchisor’s product. For example, car franchises will sell the cars of the franchised brand but operate under their name and branding. |
| Business format franchise | This is the most popular type of franchise model. The business format franchise involves the franchisor providing franchisees with a complete package. Franchisees will operate under the franchised business’ name and branding, often using the same business model, suppliers, and equipment. The franchisee will manage their employees. |
| Management franchise | This franchise model is similar to the business format franchise. However, in management franchises, the franchisee is more of an overseeing manager than somebody actively involved in the business’ daily operations. The level of involvement of management model franchisees varies from franchise to franchise. |
The Ideal Business Model For Franchising
The ideal business for franchising has:
- a successful history;
- a replicable and scalable business model; and
- long-term consumer demand beyond its existing market.
Considering whether your business has the above qualities before embarking on a franchise journey is crucial. Franchising success is not so much about the specific type of business you have but your preparedness for franchising and whether your business model is replicable.
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Preparing Your Business for Franchising
As with any approach to business growth, there is no guarantee of franchising success. However, you can test whether franchising would be an appropriate endeavour for your business. First, write a franchise operations manual detailing everything a new franchisee would need to know about your business. If you complete this document, this is a good starting point and indicates that you might have an appropriate, teachable model.
Taking the previous advice further, some prospective franchisors pilot their business model as a franchise. They would formally set up a franchise by creating the necessary documents, including a franchise agreement and franchise operations manual. Then, they would find a prospective franchisee who will join the franchise, and they will either pay nothing or dramatically reduced fees while they set up and test the pilot franchise. The franchisor would then use the outcome of this test to indicate how successful a larger franchise might be.
This handbook covers all the essential topics you need to know about franchising your business.
Key Takeaways
There is no right or wrong type of business in the franchise industry. However, there are businesses that franchising is better suited to. Suitable businesses will have easily replicable business models, broader consumer demand, and a history of proven business success. If your business has all these qualities, then franchising may be an appropriate choice for expanding your brand. It is also essential to remember that no method of business growth has guaranteed success, including franchising. This lack of guarantee is why it is vital to carefully consider whether your business is franchisable before you seek franchisees and create a franchise.
If you need help setting up a franchise, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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