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.

Contact a FranFinders franchise consultant today.