Product Model Franchises VS. Business Model Franchises

When you get ready to purchase a new car, you probably will not just pick out the first one you come to, make the financial arrangements, and drive it off the lot. Most likely, you are going to tell the salesman that you want this particular color, leather upholstery instead of cloth, or vice versa, and whether or not you want other options that are available. You may also be able to do the same thing if you are having a home built. Some builders will allow you to make changes in existing home plans. For example, you might tell the homebuilder, “I’ll give up this closet if you’ll make the room bigger,” or, “I want a larger front porch.” Because you are able to make these choices, the car dealership and/or the homebuilder are considered product model franchises. (Other businesses operate as product model franchises also; these are just two examples).

However, other businesses don’t operate that way. Instead, they decide the best way to operate so that they can be sure that the business makes money. Once they find a method that works successfully to achieve that particular goal—making money—they adopt it and adhere to it, making changes only when or if it is absolutely necessary. They are called business model franchises. Both product model franchises and business model franchises have advantages. Product model franchises offer the customer or consumer more freedom of choice, and that one thing is what draws him to such a business. Also, product model franchises may be more willing to make changes or try new techniques, particularly if they see that it will draw more customers.With a business model franchise, however, the customer or consumer is already familiar with or knows with a fair amount of certainty what is available through that business. And that sense of sameness and continuity is what he is looking for.There are some disadvantages to both types of franchises. The choices available through a product model franchise may come at an increased price or extended delivery, service, or completion time. The consumer may not have the luxury of spending more or waiting longer.


A business model franchise, on the other hand, may offer the goods or services needed when the consumer needs them, at a price that he can afford, but his choices are so limited that little or no satisfaction is gained from the purchase. He may decide that having a choice is worth extra expense or additional wait time.Further, a business model franchise owner may actually find himself “left behind”, particularly if the model is so rigid as to leave little or no room for improvement. It is true that some business model franchises can remain profitable without making significant changes; however, others may not be able to compete, and therefore may be forced to cease operation.

How to Choose a Franchise Attorney

You have owned and operated a successful business for some time now. Your profit margin is good, your product and services have been well-received, and you are fortunate enough to have good employees. You were even able to open a second location, and it is also doing well.

Because of all this, you have been considering franchising your business. In other words, you’re ready to sell your business model—that is, the stuff that made your business what it is today—to other people.

When you franchise, you will be entering into a legal agreement with someone. The agreement will allow that person to use your company’s brand name or trade name, and to carry and/or sell your company’s products. Because of this, you will most likely want to use a franchise attorney. In that way, you can make sure that both you and your franchisees are protected.

A franchise attorney will help you with everything that is involved in franchising, literally from start to finish. The franchise attorney can get the ball rolling for you when you are ready to franchise, and continue to help you as your franchises develop and grow. If something should go wrong, the franchise attorney can help you terminate the agreement fairly, protecting your interests and investments while ensuring that things are brought to a satisfactory conclusion with the former franchisee.

Remember that as a franchisee, you are still an employer, with taxes to pay, payroll to distribute, and all the other tasks that fall on an employer’s shoulders. So, you want your franchise attorney to assist you in that area also.

So, how do you know which attorney would make a good franchise attorney? For starters, ask yourself these questions:
•Does the franchise attorney I’m considering specialize in franchise law or have a background or experience in franchise law?
•Is the attorney I’m considering licensed to practice in other states, should my franchise ever extend beyond my “home” state? (This is especially important if your franchise is located in a city that closely borders a city in another state. An example of this is Columbus, GA and Phenix City, AL.)
•What sort of fee schedule does the attorney I’m considering have? Does he charge a flat rate for certain things and hourly fees for others? Are both flat rates and the hourly fees reasonable? (It’s perfectly OK to “fee shop”, but remember keep the old adage “You get what you pay for” in mind when you’re doing this.)

You may think of other questions that you might ask when choosing a franchise attorney. Go ahead and ask them, too. When you find one who has satisfactory answers to all your inquiries, you will have found your franchise attorney.

If you need direction for selecting a franchise attorney, consider the advice of a professional franchise consultant.

What is a Franchise Area Developer?

“Area developer” is a term that is used by franchisers to describe people who take on a unique challenge when it comes to franchising. Franchise area developers are not content to start with just one store or business. Instead, they choose a geographic area and obtain exclusive rights, through signing an agreement with a franchiser, to open a specific amount of the franchise’s stores or businesses by a specific date.

Franchise area developers must have access to funds which can be used for such endeavors, as they will be expected to pay a development fee at the very start of the venture. The payment of this fee will ensure that their rights of exclusivity are secure. Further, each time a new store or business is opened, the franchiser will receive a fee.

Often, however, Franchise area developers receive bonuses, commissions, or other types of financial incentive each time they are successful in opening a new store or business. This can help them recover the money they initially paid.

Franchise area developers who do not accomplish their goal of opening a specific amount of the franchise’s stores or businesses by a specific date may suffer serious consequences. They may have to pay a penalty, as well as risk losing rights of exclusivity. Additionally, the agreement may be considered null and void by the originating franchiser.

Oftentimes, however, the originating franchiser is willing to work with area representatives. After all, both parties have the same goal in mind—that of expanding the franchise and making sure that it is a success.

Franchise area developers may also have to take on other duties and responsibilities. This is especially if franchisers consider them or even require them to be a sub-franchiser or even a master franchiser. If this is the case, Franchise area developers will then find people in their exclusive area who want to become franchisees. These franchisees are then given training and support by the area representatives in preparation for opening and operating a store or business in that area.

Franchise area developers who do perform these additional tasks, however, are usually compensated. The compensation comes from the franchise fee, of which they receive a certain percentage, and from the profits made by the franchise’s permission to use the franchise’s name and other “perks”. This is sometimes referred to as a “royalty” fee.

Franchise area developers admit that their chosen profession may not be an easy one; however, many are quick to say that it is well worth the challenges they face. The originating franchiser has the advantage of dealing with specific Franchise area developers rather than a number of individual store or business owners. This allows for a more effective flow of communication between everyone involved.