Five Types of Franchising & Their Advantages/Disadvantages

Five Types of Franchising & Their Advantages/Disadvantages

If you have made the decision to enter the world of franchising, part of your research will include exploring the industry. You will find some advantages and disadvantages to the five types of franchising, which makes it important to determine the one best suited for your needs. Take a look at the pros and cons of each type of franchise to find the right fit.

Business Format Franchise

When people talk about types of franchising, this is the traditional model that comes to mind. The business format franchise allows the franchisee to operate using a recognizable brand name and a proven business model in exchange for a financial investment. The franchisor provides comprehensive franchisee training and gives ongoing support to ensure the best possible chance for success. The most identifiable industry in the business format franchise are restaurants.

Pro: Franchisees often feel like their investment is more secure having industry specialists training them and providing ongoing support

Con: If you prefer to be creative and think outside the box, this may not be the best fit. The parent company sets down guidelines and expectations for brand products and services.


Distribution Franchise

This is also called a product franchise because the franchisee distributes products from the brand. For a fee, the parent company allows the use of their trademark in exchange for product sales. These are typically large product dealers like vending machines or car repair. The product distribution franchise actually represents the highest percentage of total U.S. retail sales.

Pro: This is a B2B franchise model that allows you to work independently.

Con: There are restrictions that require you to sell the franchisor’s products exclusively.


Investment Franchise

This is a large capital investment opportunity with a big price tag. It’s a business acquisition model allowing the franchisee to become a major investor. Examples of investment franchises include hotels and large restaurants.

Pro: If you are looking for an investment option with little day-to-day interaction, this is a good choice.

Con: Be prepared for the possibility of capital gains taxes when letting go of the investment.


Conversion Franchise

This hybrid allows the franchise system itself to grow as it converts existing businesses to a franchise unit. The franchisee acquires the parent company’s name, marketing and advertising programs, training system, and client service protocols.


Conversion franchises have the potential for immediate growth for smaller businesses by growing their customer base and allowing them to cash in on a recognizable brand name. You may often see businesses like florists, plumbers and electricians convert to this type of franchise.

Pro: This can give a boost to a small mom-and-pop business with quick ramp-up by partnering with a larger brand name.

Con: Many small business owners may have an adjustment period not being the boss of a business they created.


Job Franchise

Job franchises are typically considered home-based businesses. This model has grown in popularity since the onset of the pandemic because many entrepreneurs are looking for work-from-home options. This service-based franchise can be run solo or with a limited staff. A great example is direct mail marketing, like the services provided by RSVP.


Pro: This type of franchise requires a smaller price tag for franchise fees and startup costs, equipment and supplies.

Con: This model is all about providing great customer service. This is not ideal if you are not customer-service oriented.


The RSVP Franchise Opportunity

If helping businesses grow in your community sounds like a great opportunity to you, then an RSVP advertising franchise might be the right fit. Ours is a brand that will provide you with a turnkey business that you can enjoy.

Experts concur: Being passionate about the work you do provides energy and excitement to succeed. Driven and self-motivated entrepreneurs with RSVP are able to build a strong lead-generation network, connecting local companies with prospective customers through direct mail advertising. This is ideal for those who are social and have sales and marketing know-how. Plus, it gives you the ability to work from home and enjoy a great work-life balance with appointment-based hours and no weekends.

The initial investment for Franchise Members is under $100,000, with an initial franchise fee of $15,000 that includes our comprehensive training.

If the RSVP franchise model suits your needs, you can get started right now on the road toward improving your lifestyle and your financial future.