The method, franchising can be used for expansion of marketing products or services. Franchising can be broadly categorized into two ways, one is a product trade name franchise and the second is business format franchise.
Product Trade name franchise: Under this type, the franchisee selects on one manufacturer's product and thereby acquires the manufacturer's identity to some extent. For instance gas service station, automobile dealership scullers, Arrow etc.
Business format franchise: Under a business format franchising a franchiser licenses
the franchisee rights to market services in a defined territory following specified procedures
and practices. Thus, a McDonald franchisee has to design outlet as per given format.
produce burgers as per predetermined process and standards which are specified in .
great details and provide service in a specified manner. The emphasis is on following
business format in terms of processes and procedures to provide quality service.
Distributorship refers to franchising territorial rights for sale of a product. Thus, companies
like Hyundai Motors, Toyota appoint dealers to sell cars while Samsung, LG Electronics
and Videocon appoint dealers to sell consumer durables. In distributorship emphasis is
more on product sale.
In some cases a franchiser licenses manufacturing and distribution rights for a product in
a specified territory as per given formula. Companies like Coca Cola and Pepsi license
manufacturing and distribution to small companies within defined territories following
specified formulae and manufacturing methods.
There are several variations in franchising agreements to take care of requirements of
both parties as under:
- Territorial franchise: Here the franchisee has the authority over a territory which
may be a city, state or a country. The franchisee can appoint suh franchisees with
in this territory. - Mobile franchise: Under this a franchisee acquires right to sell a particular product
or service in a mobile van - Distributorship: A contractual agreement which covers a particular geographical
area for distributing of the products. - Co-management: Under this type the franchiser has 'the majority of investment
and the partner manager shares the profits proportionately. - Leasing: In this the franchiser can lease the land, building and equipment to the
franchisees. - Licensing: In this type the franchisee is liable to use the franchisers trade mark '
and business processes. - Service: In this type, the professional services provided by the franchiser are
authorized by the franchisee.