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The main types of franchising

This business model represents a valid system for the growth and development of companies in a wide range of industrial sectors. 

It is based on an agreement between two commercial entities: the company that owns the brand and know-how and the entrepreneur who adopts this commercial structure to develop a new business.

With a wide variety of business and organizational systems, the main types of franchising offer valid opportunities for businesses of different nature and size, each with specific characteristics, advantages and challenges to overcome. From franchising in the retail sector to the distribution of services and the industrial sector, the types of franchising adapt to the needs of each product sector, facilitating a customization of the company structure that allows it to respond to consumer requests and the characteristics of its geographical target.

Confirmation comes from the data released by MarketSplash, according to which, considering all types of franchising, approximately 95% are owned and managed as single units, generally by entrepreneurs aged between 45 and 64, equal to 55 % of the entire affiliate demographic. These data confirm how, regardless of the sector of interest, there is a model capable of satisfying the growth aspirations of every entrepreneur.

The ability of this commercial affiliation system to adapt and respond flexibly to market challenges makes it a strategic choice not only for start-ups, but also for established companies wishing to expand their presence internationally.

For these reasons, the analysis of each type of franchising, including the emerging models that are gaining ground in response to unexplored niches, becomes fundamental to capitalize on the opportunities offered by each type of market.

Point 1. According to Dr Franchises, a new business opens every 8 minutes among the main types of existing franchises

Point 2. According to Statista data, in the United States alone this business model has led to the opening of over 800,000 businesses

Which are the most important types of franchising? 

The choice of the type of franchising represents a crucial step for entrepreneurs who wish to start and organize a business structure best suited to their business vision.

Understanding how a chosen franchising works is therefore essential for any entrepreneur who intends to start a business in line with his skills, resources and growth objectives. From commercial product or service affiliations, which allow you to sell goods or offer services under the name of a recognized brand, to those for the production of goods, where affiliates play an important role during the production chain, the range is wide and diverse.

We can distinguish this business model with respect to the type of activity:

  • Industrial: In this commercial collaboration, the parent company provides the technology, know-how and intellectual property rights necessary to produce the good, while the affiliate takes responsibility for local production and, often, distribution. This type of franchising is particularly widespread in sectors where product quality and standardization are crucial, such as in the food, beverage and chemical products sectors.
  • Distribution: It mainly focuses on the retail or wholesale of goods produced by the brand or third parties. The main advantage of this type of franchising is access to a portfolio of consolidated and recognized products on the market, accompanied by proven marketing and promotional strategies. Examples include car distributors, clothing stores and electronics retailers, where brand value and customer loyalty play a key role in determining the degree of development of the business.
  • Services: With this commercial agreement the company offers a brand, an operating system and ongoing support, allowing the partner to focus on the quality of service offered to the customer. The main attraction of this type of franchising lies in its scalability and relative ease of entry into the market, with initial investments often lower than other business models. The success of this commercial agreement lies in the ability to maintain high quality standards, adopting procedures for the execution of services that allow the strength of the brand to be exploited to build a solid customer base. This type spans a wide range of industries, including restaurants, education, shipping, logistics, repairs and financial services.

The main characteristics of the franchising contract 

The franchising contract regulates the legal relationship between the franchisee and the franchisor, defining the role of both, the obligations required for its fulfillment, the rights and methods of carrying out the activity.

This legal agreement is made up of some clauses intended to regulate, for example, the duration, the expected royalties and any entry fee, the exclusive use of the brand’s brands, products and services, the support and assistance provided by the franchisor.

Although there are international guidelines that aim to standardize some fundamental aspects of the franchising contract, the applicable legislation varies significantly from one country to another, reflecting the legal, economic and cultural peculiarities of each legal system. Let us examine the main elements of the franchising contract together:

    • Duration, renewal and withdrawal. The duration of a franchise agreement is a key element that establishes the period of time during which the franchisee is authorized to use the brand and the know-how of the brand. This duration can vary significantly depending on the brand and the sector in which it operates, often extending from 5 to 10 years, with the possibility of renewal. Indeed, it is essential that the contract clearly specifies the renewal conditions, such as the required notice and any applicable fees, in addition to the withdrawal procedures, which allow both parties to conclude the agreement in a fair and transparent way, if expectations are not met or changes in market conditions occur. 
    • Entry fees e royalties. The entry fees constitute the fee requested from the franchisee at the beginning of the commercial relationship: they generally cover the rights to use the brand, the transfer of know-how by the franchisor and the use of the brand’s distinctive signs. Royalties, on the other hand, are periodic payments paid by affiliates, which can be calculated as a fixed amount or as a percentage of the turnover generated by the activity. These contributions finance the ongoing services provided by the franchisor, such as technical support, marketing campaigns, training courses and access to partnerships established with banks and suppliers. 
    • Franchise package. The franchise package includes all the elements provided by the franchisor to ensure the start-up and effective management of the business. This includes the use of the company’s distinctive signs, operational know-how, technical and commercial assistance, as well as training programs for the entrepreneur and his staff. These elements are essential to maintain brand consistency and operational efficiency across all regional locations, while ensuring that each partner has the knowledge and resources needed to develop their business.
  • Purchase prices. Often, especially in agreements concerning the distribution of goods, it is envisaged that the affiliate does not pay royalties, but proceeds to purchase a minimum quantity of goods at a certain price. It is important that the contract clearly establishes how the prices of these goods will be determined, ensuring fair and advantageous conditions for the franchisee, without compromising the quality or accessibility of the products or services offered to end customers. 
  • Exclusivity and non-competition agreement. Territorial exclusivity ensures the franchisee the right to operate in a specific geographical area without direct competition from other franchisees of the same brand. The non-competition agreement, on the other hand, imposes restrictions after the conclusion of the franchise agreement, prohibiting the franchisee from starting a similar business or working for a competitor for a certain period of time. These elements aim to protect the investments of both the franchisee and the franchisor, ensuring a win-win collaboration for both parties. 
  • Operational standards and quality of service. It is crucial to include detailed clauses in the franchise agreement regarding the operational standards and quality requirements to be guaranteed by the partners. This ensures that all stores reflect the brand’s image and values, offering a consistent, high-quality experience to customers. Detailing these standards helps prevent territorial discrepancies and maintain brand integrity on a global scale. Additionally, this section of the agreement may include provisions governing audits and compliance assessments, establishing a transparent and impartial mechanism to ensure adherence to agreed standards.

Incorporating these elements into the franchise agreement helps create a solid and transparent basis for a fruitful collaboration for both parties.

Mail Boxes Etc. offers entrepreneurs a business model with which it is possible to have access to a consolidated network of partners worldwide, which operates using professional solutions designed to boost the growth of the company.

From e-commerce to logistics, from marketing campaigns to international shipping services, MBE solutions offer entrepreneurs the opportunity to become a point of reference for Business and Retail customers. Entrepreneurs can open an MBE center to start and develop their own business with the financial support and continuous training offered by MBE.

Moreover, with respect to the organizational model adopted, we can distinguish other types of franchising, such as:

  • Direct. This agreement provides a brand with the right to operate and manage a business under its brand in a specific geographic area. In this model, the relationship between the parties is therefore direct and personal, with a clear communication channel and without intermediaries. This type of franchising is ideal for entrepreneurs who wish to start a business with the full support of an established brand, benefiting from training, know-how and promotional materials.
  • Indirect. In this type, the company establishes a relationship with one or more entities (often a distributor or an agent) that act as intermediaries. This model is common in international markets or in geographic areas where the parent company prefers not to directly manage its partners due to linguistic, cultural, or logistical barriers. While it may involve increased complexity in communications and quality controls, it offers companies the opportunity to expand into new markets with reduced investment and risk.
  • Master franchising. This model allows the partner (master franchisee) to acquire exclusive rights to develop the business in an entire region or country: the entrepreneur can therefore open several branches in the identified region. A particularly advantageous agreement for companies that wish to rapidly expand their commercial network in large geographical areas, taking advantage of the partner’s local knowledge to overcome the challenges present in a specific market.
  • Multiple. A contract that allows affiliates to obtain the exclusive right to open various affiliated businesses in a specific area. The contract is suitable for entrepreneurs with experience, financial resources and advanced management skills, who are capable of managing more complex and larger operations. The brand has the ability to expand rapidly, generating significant economic returns, avoiding having to recruit and train a large number of partners, but requires constant commitment to supervising and maintaining quality standards in all commercial locations.

The different types of franchising, with their specificities, advantages and challenges, offer multiple possibilities for those who want to embark on an entrepreneurial path supported by brands and business systems already underway.

Mail Boxes Etc., which operates in a rapidly expanding sector, such as logistics and shipping, offers entrepreneurs a system that allows them to become part of a consolidated international network, with over 30 years of experience, which helps companies to face challenges by taking advantage of training, assistance and continuous technical support. You can start a MBE business and have a team of consultants at your disposal who will accompany you step by step during your growth journey, also participating in the meeting and collaboration moments provided for all affiliates.

Open a new MBE Center

Mail Boxes Etc./MBE Centers are operated by independent operators as franchisees, who operate under a franchise agreement under the brand name of MBE. Through its franchise network Mail Boxes Etc. provides support services for businesses and individuals. Logistics and shipping services represent the main services of MBE – enabled by MBE through contractual agreements concluded for the benefit of its franchisees with the main domestic and international express couriers - and other graphics and printing services - provided either directly or on the basis of agreements with large printing centers. The promotion of services for business and private customers is carried out in the framework of the business activity of each MBE franchise partner within and outside of the MBE Centers ("farming"). Each franchise partner is contractually obligated to perform such activities. Mail Boxes Etc. and MBE are registered trademarks used with permission of Fortidia - a registered trademark of MBE Worldwide S.p.A - (All Rights Reserved). The services offered by the individual MBE Centers can vary depending upon the location. The material available on this Internet site, the information contained herein and any other relevant related data may not in any manner be copied, distributed, changed, republished, reproduced, downloaded or forwarded to third parties, without the expressed prior written authorization of Sistema Italia 93 S.r.l. We accept no responsibility with regard to the unauthorized use of the material available on this Internet site, the information and/or the data contained herein.