Franchising

Franchising is a powerful means of distribution for goods and services. The most common and prevalent types of franchising are:

1. Product franchising. The product is sold as it is receievd from the company. The only value addition that happens at the franchise outlet is in terms of display which provides easy access and purchase to the customer. An example would be car dealership.

2. Process franchising is a little more complex. Here, The franchise outlets are granted the rights to the brand name and the process by the parent organisation. The "process" or the "recipe" may be patented by the parent organisation and the franchise outlet has the right to use the "process" and sell the product under the parent organisation's name. Examples of this type are mainly in the food industry.

3."Business Format Franchising" is more comprehensive, where the name, sale and method of doing business are transferred to the franchise outlet. The transfer of knowledge for conducting the business has to be accompanied by an effective follow-up mechanism. McDonald has perfected this technique over the years.

Franchising appeals to people who are inerested to buy a ready-made business.
Thus, they can avoid having to build a business step by step, as must entrepreneurs who start from scratch. In return for their investment, frachisees receive professional and other help to start and manage the business.