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What are the types of franchises?

Identify The Types of Franchises

Before you begin the process and draw up the legal documents, you have to determine the correct franchise category for your business to ensure you are legally compliant and forming the type of franchise structure that you need.

There are three types of franchise models:

Distributorships grant the right to sell the parent company's products. Examples: car dealerships selling General Motors, Ford, Toyota vehicles.
Brand Name Licensing gives the licensee the right to use the parent company's brand in the operation of their business. It is the product or service that is licensed and not the business itself. Example: a sports store in a small town is granted the exclusive rights in that town to sell Nike products.
Business Format allows the franchisee to purchase the right to operate a unique business system (retail, home-based, fast food concept, etc.) that has an established history and track record created by the franchisor. This is the most commonly used franchise model.

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