TAGBILARAN CITY COLLEGE

College of Business and Industry

Tagbilaran City, Bohol

Course Code SPE 2 Instructor Sharon Y. Borja

Course Title Franchising E-mail Address sborja.tcc@gmail.com
Course Credits 3 units Contact Number 09296767487
Course
General Education Consultation Hours
Classification
Pre-requisite(s) Consultation Venue

LEARNING MODULE

Learning Module 2 : Types of Franchising

Duration of Delivery : August 29 – September 2, 2022

Due Date of Deliverables : September 5, 2022

Module 2 Types of Franchising

Intended Learning Outcomes:

➢ Understand the concept of franchising;
➢ Compare different types of franchising

Franchising is a relatively flexible method, and just about any type of business can be franchised.
There are many types of franchises, that can be categorized according to different factors, like
investment level, franchisor’s strategy, operations, marketing, relationship models, etc.
According to World Intellectual Property Organization, the following are the types of franchising.

1. Product or Distribution Franchise

A product manufactured by the franchisor (or on his behalf
by another) is sold to a franchisee who in turn sells it to the
consumer under the trademark of the franchisor. Such a
franchise is usually restricted to a particular geographical
area and the franchisee pays fees referred to as royalties to
the franchisor for the right to do business under his
trademark.

2. Manufacturing, Production, or Processing

Franchise
The franchisor sells to the franchisee an essential
ingredient or provides some specific know-how, which
along with ongoing quality controls by the franchisor,
enables the franchisee to manufacture/product/ process the
final product and sell to the consumer. Coca-Cola operates
in many markets in this manner supplying franchisees
with the essential ingredient of Coca-Cola protected by a
trade secret enabling them to produce the final product.

3. Business format franchising /Pure Franchising

Pure franchising, also known as comprehensive or business
format franchising, is a type of franchise that involves a
complete business format, a license, and a trading name,
the products or services to be sold, the store layout, the
methods of operation, a marketing plan, a quality control
process, a two- way communications system, and the
necessary business support services. The franchisee
purchases the right to use all of the elements of a fully
integrated business operation. Pure franchising is the most
common and the fastest growing of these three types of
franchises.
Four essential elements of business format franchising.

1. The franchisor allows the franchisee to use under license its proprietary IP, principally its
Trademarks but also its designs, patents, copyright, and its confidential business information.
2. The franchisor controls the way the business is run and managed by the franchisee.
3. The franchisor provides training, mentoring, and assistance to the franchisee.
4. The franchisee makes both initial and periodic payments to the franchisor.

Registering a Trade Name

Naming your business is an important branding exercise. If you choose to name your business as
anything other than your own personal name (i.e. a “trade name”), then you’ll need to register it
with the appropriate authority as a “doing business as” (DBA) name. Consider this scenario: John
Smith sets up a painting business and chooses to name it “John Smith Painting.” Because “John
Smith Paining” is considered a DBA name (or trade name), John will need to register it as
a fictitious business name with a government agency.

Hybrid franchising

According to franchise guardian .com, among the types of franchising, conversion franchising is
the only hybrid. It is a method of growing franchise systems wherein a franchisee enters into a
relationship with an existing company and converts into a franchise unit. The franchisees adopt
trademarks, marketing, and advertising programs, training system, and critical client service
standards. They also usually increase procurement savings. The franchisor in this model has a
potential for very rapid growth in terms of units and royalty fee income.

Examples of industries that extensively use conversion franchising are real-estate brokers, florists,
professional services companies, home- services, like plumbing, electricians, air conditioning, and
so on.

References:
https://francity.com/about-franchising/types-of-franchises/
http://bitly.ws/sA7i