What are the two types of franchises?

What are the two types of franchises?

Franchising has become a popular business model, offering a blend of entrepreneurial independence and established brand recognition. But did you know that there are actually two types of franchises? Let’s delve into this fascinating topic.

The Basics of Franchising

Before we delve into the two types of franchises, it’s important to understand the basics of franchising. Essentially, franchising is a business model where a franchisee is granted the right to operate under the franchisor’s established brand and business model. This arrangement offers a number of benefits for both parties.

For the franchisor, it provides a way to expand their business without requiring substantial capital investment. For the franchisee, it offers the opportunity to run their own business with the support and recognition of an established brand.

The Two Types of Franchise

Now, let’s get to the heart of the matter: the two types of franchises. These are known as the business format franchise and the product distribution franchise. Each has its own unique characteristics and benefits.

Business Format Franchise

The business format franchise is the most common type of franchise. In this model, the franchisor provides the franchisee with a full range of services. This includes the business model, training, marketing support, and ongoing assistance. Examples of business format franchises include fast food restaurants, hotels, and fitness centers.

For the franchisee, the main advantage of a business format franchise is the level of support provided by the franchisor. This can greatly reduce the risk and uncertainty of starting a new business.

Product Distribution Franchise

On the other hand, the product distribution franchise is more akin to a supplier-dealer relationship. The franchisor supplies the products, and the franchisee sells them. Examples of product distribution franchises include car dealerships and gas stations.

For the franchisee, the main advantage of a product distribution franchise is the ability to sell well-known products in a ready-made market. However, the franchisor’s support level may be less than in a business-format franchise.

Choosing the Right Type of Franchise

So, which type of franchise is right for you? That depends on a number of factors, including your personal preferences, skills, and business goals. Here are some things to consider:

Your Level of Independence

If you value independence and want to have more control over your business, a product distribution franchise may be a good fit. While you’ll still have to adhere to certain guidelines the franchisor sets, you’ll generally have more freedom in running your business.

On the other hand, if you prefer a more structured approach and appreciate the support and guidance provided by a franchisor, a business format franchise may be a better choice.

Your Business Skills and Experience

Your skills and experience can also play a role in determining which type of franchise is right for you. For example, you might thrive in a product distribution franchise if you have a strong background in sales and marketing.

If, however, you’re new to the business and would benefit from comprehensive training and support, a business-format franchise might be a better fit.


Understanding the two types of franchises can help you make an informed decision about your franchising journey. Whether you choose a business format franchise or a product distribution franchise, the key is to do your research, understand what each type offers, and consider how it aligns with your personal and business goals.

Remember, franchising is not a one-size-fits-all solution. It’s about finding the right fit for you. So take your time, ask lots of questions, and make the right choice for you.

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