If you are planning to purchase a franchise you need to know what exactly you are taking on.

3. A franchise is an agreement between two legally
independent parties, a Franchisor (seller) and a
Franchisee (buyer) wherein the franchisor sells
a right to market product or service using the
trademark or trade name owned by his/her
business and the franchisee agrees to market the
same adopting the predefined operating methods
of the franchisor. Franchisee, apart from the
incurred cost on buying also has to oblige to a
payment of royalty fees which is periodical and
franchisor takes up an obligation to provide
continued support to the franchisee, throughout
franchise lifetime.

4. Types of Franchise
Even though the types of franchise can be
classified into various categories based on
the industry, product and so on; the most
recognised classification is based on the type
of ownership.
Ownership on Distribution: It is a type of
franchise model wherein the franchisee
purchases a right to distribute a product as
per standard protocols set by franchisor.
Best examples of such businesses are Coco-
Cola and Company, Ford or Hyundai Cars etc.
Such Businesses could be just dealership
based and are limited to sales and not the
actual production.

5. Types of Franchise
 Ownership on Business Replication: It is a
type of franchise model wherein franchisee
purchases the right to replicate entire
business as per standard protocols set by
franchisor. The standing examples of such
businesses are McDonald’s, Blimpie, Indian
Institute of Hardware
Technologies(IIHT), UPS store etc

7. Types of Franchise
(Based on Unit Type)
Master Unit: A master franchise unit
encompasses an ownership of the purchased
unit and right to develop the other centres
that would then be the sub centres of the
region. In some cases a single franchisee
could buy more than one centre in a specific
geographical area (a
city, town, region, country) with managing
operations from one centre and treating rest
as sub centres. There are also instances
where the franchisor waits for certain number
of centres to be started in a region before
selling/nominating a master franchise which
could then act as service provider to the
other already existing units.

8. Types of Franchise
(Based on Unit Type)
Sub Unit (may be also called single, regional
or sector centres): It is a single franchise
unit that could be completely independent of
or dependent on a master franchise depending
on the franchise agreement. A franchisee
could also purchase multiple single units and
operate them independent of each other if
allowed by franchisor.

9. Types of Franchise
(Based on Unit Type)
Most of the major franchisors such as
Subway, Jan-Pro, IIHT Technologies, and Kumon
provide options of either type of ownerships. For
easy understanding, let us consider an example of
a franchise like IIHT. It was started in India
two decades ago and has adopted the franchise
business model, after a few years of success, for
multiple reasons. It grew very fast through 100s
of franchises across the nation, selling both
master franchises and region franchises, set up
independent wing in China replicating entire
operation similar to one in India. It now has
centres in Malaysia, Turkey and many African
countries. The franchise type is customised as
per country requirements, law of the land and
best practices.

10. It is essential to know what a
franchise is and various
classifications so that as a
prospective buyer, you are sure
what type of franchise exists and
are able to analyse and choose the
one that suits you best. You
should also explore franchise
costs, brand reputation, terms and
condition and explore multiple
facets of a franchise.

11. Corporate Headquarters
#15,Sri Lakshmi Complex, 4th Floor, St. Marks Road, Bangalore - 560 001. India
Tel: 91 80 6160 4545 e-mail: franchise@iihttechnologies.com web: www.iihttechnologies.com/