Fish Window Cleaning Blog

Franchise Systems: An Overview of 2 Types
Posted on Thursday, June 30th 2022


Franchise Systems: An Overview of the Two Types

A franchise is a system of distributing products or services through an agreement to do business under the franchisor's name. While there are different sub-categories of franchising, there are two main types of franchise systems: product or trade name franchising and business format franchising. The franchise system for a product or trade name has a focus on a distribution role, while the business format system is concentrated on a business operation model.

Product or trade name franchising

In product or trade name franchising, a franchisor owns the right to a name or trademark and sells or licenses the right to use that name or trademark. Examples include automobile dealerships and soft drink distributorships.

Product or trade name franchising is how products are distributed in a retail sales model. Goodyear, Exxon, Chrysler, and John Deere are all examples of product franchising. In some cases, such as soft drink franchising, the rights to manufacture the product are also granted. With this type of franchising, the product defines the franchise, and the franchisee pays a fee for the license to distribute the product or operate under the trade name.

Franchisees in this model are responsible for the operation of their own business. The franchisee can sell competing brands as well, or, in the case of a franchisor with multiple products, you can choose to enter into an exclusive dealership with only the franchisor's brands.
 

Business format franchising

With business format franchising, there is a more detailed relationship. The franchisor provides franchisees with a full range of services and support. Franchisees sign an agreement to conduct operations in conformity with specific rules laid out by the franchisor. Fish Window Cleaning is an example of business format franchising.

Business format franchises are the more common forms of franchising. In this format, franchisees offer a variety of services to franchisees, including a model of how the business will operate. The franchisor works with choosing a location or territory, training, and business and marketing plans. There are pre-chosen vendors and assistance in obtaining financing.

In this franchising option, there is a uniform concept of how to conduct business. The focus is on consistency in operation across all locations so people can rely on what to expect when becoming a customer. Franchisees pay an upfront franchise fee and ongoing royalties that allow the franchisor to continue to invest in improving the brand.

Key points to know about franchising

The International Franchise Association has a good explanation of franchising beyond the two types of franchise systems. They mention four things specifically:
  • Franchising is about relationships
  • Franchising is about brands
  • Franchising is about systems and support
  • Franchising is a contractual relationship

Relationships

In either type of franchise operation, you are in the business of creating relationships. As a franchisee, you have a relationship with your franchisor to meet the obligations of your agreement including how you represent the brand and represent the brand standards.

Brands

Speaking of brands, in a franchise relationship, you are a promoter of the brand. You can attract customers based on the brand alone, and all franchisees in the organization contribute to the success of the brand overall.

Support

A strength of the franchising system is the support available to franchisees. This helps the franchisor make sure the brand succeeds using a proven model of success, and it helps the franchisee with a set of standards to follow to ensure success. Every franchisor presents their support in different ways — training methods and frequency, technology, and marketing innovation, etc. As you evaluate franchises, the support element will be a critical one to review.

Contractual Relationship

A franchise system is a legal form of business between a licensor (franchisor) and a licensee (franchisee). A legal agreement lays out how the franchisee will use the brand and business method. The franchising relationship is set out in a franchise disclosure document and is governed by the Federal Trade Commission.

Consider a Fish Window Cleaning franchise

A Fish Window Cleaning franchise is heavily invested in supporting our franchisees. Some of the support we provide includes:
  • Extensive training and ongoing support
  • Tools and materials available 24/7 through our intranet
  • Your own customizable Fish Window Cleaning website
  • Web-based proprietary software handles routing, scheduling, P&L, A/R, and more
  • Marketing tools such as SEO, vehicle branding, and corporate call center
  • Established partnerships through our national accounts program
Being a business owner through the support of a franchise system can be a profitable decision to capitalize on the franchisor's successful investment in their brand. Gather information from franchise opportunities of interest to help you decide on a franchisor-franchisee relationship that is a fit for your future. Here are some of the Fish Window Cleaning FAQs as an example.

We invite you to request more information on our franchise model and how it can support your entrepreneurial venture.

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