There are roughly over 700,000 franchises in the United States alone, but when it comes to classifying each franchise into a category, there are basically 3 different types of franchises. The most common is the Business Format Franchise, with about 80% of all franchises falling into this category.
In this model, the franchisor sells the rights to buy into the franchise, use the franchise logo, and operate under the name of the franchise. Subway, Anytime Fitness and AAMCO are a few well known examples.
These franchisees (individual franchise owners) receive ongoing support from the franchisor (owner of the franchise) and guidance to help the franchisee run a successful business.
The franchisor remains motivated to make sure each franchisee is successful because the franchisor receives an ongoing royalty commission from each franchisee. Some franchisors make a percentage of gross revenue, while others receive a flat fee in exchange for the right to operate under the business name.
In addition to being able to use the franchise name, trademarks, trade names and logos, etc, the franchisee also gets access to the established systems that the franchisor has built. This helps to ensure that the product or service that the franchisor has created stays the same when it is sold by each franchisee.
It also ensures that quality remains consistent.
It’s why McDonald’s french fries taste the same, just about wherever you buy them from, even though each location is independently owned and operated.
For small businesses looking to franchise their concept, we help by taking their current systems that are in place, and build a model that is easy to replicate. It is equally important – or in some cases arguably more important – to have successful systems in place, as it is to have a superb product or service. Well-built franchises with a slightly inferior product or service are often more successful than organizations that have a better product, but don’t have great systems in place for franchisees to excel.
At Upside Group Franchise Consulting, we help individuals and companies to franchise their concepts, and we also help well-established franchises improve on their current systems and marketing strategies to grow to the next level.
If you have any questions about starting a franchise, or how you might be able to improve your established franchise, we can help.