Explain the four basic types of franchises.
What will be an ideal response?
a) Distributorship franchise. In a distributorship franchise, the franchisor manufactures a product and licenses a retail dealer to distribute a product to the public.
b) Processing plant franchise. In a processing plant franchise, the franchisor provides a secret formula or the like to the franchisee. The franchisee then manufactures the product at its own location and distributes it to retail dealers.
c) Chain-style franchise. In a chain-style franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory. The product is made or the service is provided by the franchise. Most fast-food franchises use this form.
d) Area franchise. In an area franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor. The area franchisee is called a subfranchisor. An area franchise is granted for a certain designated geographical area, such as a state, a region, or another agreed-upon area.
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