Unwrapped – The Two Types Of Retail Franchises

Typically a retail franchise opportunity will fall into one of two broad types – business format franchises or brand/product franchises. There’s a massive difference between the two types, and you need to be very clear what you’re investing in when choosing either. Let’s look at these in more detail…

Business Format Franchising

Investing in a quality business of this type is a bit like being recruited into the armed forces! That’s because the franchise operates with a very high level of consistency in products and “look and feel” of the outlets. It’s that same level of consistency that McDonald’s offers.

In fact, the McDonald’s franchise example is probably the ultimate example of successful business format franchising. At McDonald’s you can expect to eat the same food, prepared in the same way, served by people using the same words, wherever you go to eat it – from New Yord to Orlando, from Toronto to Venice, Benidorm to London.

This consistency has helped to build the brand by giving customers no surprises, wherever they eat McDonald’s. That consistency of customer experience is what a good quality business format franchise is all about.

So if the thought of being trained and tested to operate to exacting standards in a systems, products, services and methods of running your business appeals to you, this may be a great choice of franchise opportunity.

Brand/Product Franchising

A very different approach to franchising gives you a license to sell a particular brand of product. You would normally expect some constraints in the way you can operate, to protect the brand and prevent you bringing it into disrepute. At the same time, you will not receive training in how to operate your business, it’s strictly about the product and branding.

A great example of brand franchising can be seen every time you drive down the road – the vast majority of gas stations (petrol stations if you’re British!) are brand/product franchises. The big thing here is that you buy your product (fuel) from your franchisor and sell it under the brand name.

You must maintain certain standards of presentation, etc, to the brand. In addition it’s usual to pay a royalty to the brand for using their tradename.

So Which Type Of Franchise Is Best?

Both of these franchise formats have their place. The brand/product franchise is only worthwhile where the brand is a significant, well-known brand. It’s not uncommon for a rogue franchisor to try to “sell you” on the brand, even though it’s got no real pull in the marketplace. Watch out for these rogue franchisors, as they’re a sure sign that you’ll lose your money fast.

So, when it comes to choosing a retail franchising opportunity, take the time to consider what you want from it. If the whole approach to business matters to you, go for the business format franchise. If you just want the power of a brand, but the freedom to operate more or less as you please, while respecting the brand, then the brand/product approach might be the best fit for your own retail franchise opportunity.

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