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Types of Franchises

Franchising has been effectively implemented in sev eral different business relationships.

The Business Format Franchise

Under this model, a franchisor uses a network of franchisees to market a service or product under a common name and standardised system. This system is prevalent in Australia amongs t major food chains and standard service providers.

The key feature of such franchises, is the provision of a comprehensive system in which the franchisee has the benefit of being granted the right to use the full system, including the brand, manuals, proc edures, marketing programs, quality assurance systems, and the franchisor provides training and support services to franchisees. From a franchisor ’ s perspective, standardisation, consistency and uniformity across all aspects of the chain are essential to t his format of franchise.

Consider how for example McDonald ’ s burgers taste the same throughout Australia. In this system it is important to note that the franchisee will rely heavily on the expertise of the franchisor as the franchisor maintains significa nt control over the scope of activities the franchisee may undertake within the franchise.

Agency Arrangements

Under this format agents provide products and services on behalf of the franchisor to the franchisor’s customers. Examples include Australi apost post offices, banks and car rental companies. These arrangements often do or do not fall within the definition of a Franchise Agreement under the Code and it is important to analyse the specific set of facts to ascertain if the particular arrangement is a franchise or not.

Dealer Relationship

Under this format franchisees may be granted the right to distribute a manufacturer’s product within a specified territory or at a specific location, generally with the use of the manufacturer’s identifying name or trademark, in exchange for fees or royalties. A prime example is in the motor vehicle industry, mobile phones (e.g. Optus shops) and business equipment stores.

Distributorship

Under this format the franchisee acts as a wholesaler of the franchisor’s products within a defined territory. To satisfy the definition of a franchise the grant must accompany the right to use a trade mark or name. A common occurrence of this model would be in computer software, petrol distribution, food services, confectionery, and building industries.

Licensing or Manufacturing

Franchise Under this format the franchisor grants a licensee/franchisee the right to use certain technology or knowledge to manufacture and distribute the franchisor’s product. This format does not apply to a business model and is a common distribution channel in the information technology industry, soft drink, cosmetics and automotive industries

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