Product Franchising is a franchise relationship of two
sides in the trade sphere in which the franchisor gives and the franchisee
receives the exclusive rights, which are limited with specified territory, for
sale the manufactured products under the franchisor’s brand. These
relationships concern only to direct sales of products.
There are two types of Product Franchising.
In the first case, it is assumed to sale the
manufacturer’s products as well as products with his trademark. Franchisee in
these relationships specializes in retail as a rule since direct contact with
customers has a particular importance in this type of franchising.
The franchisor can make delivery of the products
directly to the franchisee or through third persons, the main function of which
is to distribute the products. The third persons can be agents, distributors,
sales representatives and others. This scheme of interaction allows not only
increase product sales but also gives the opportunity to sell the products in
remote areas as well as manages the financial side at a lower cost (logistics
system).
Both sides of the franchise relationships can build
interaction with the third persons according to different schemes. Products of
the manufacturer, his trademark, uniformity and corporate networks to make
products recognizable – are the main things in this kind of relationships. The
wide assortment range provided to the consumer to choose from is also
important. Franchisor can be manufacturer of toys, shoes, clothing, petroleum
products, alcoholic beverages, etc. in such relationships.
The second type of Product Franchising is the sale of
products by companies, which are not manufacturers but they have a long-term
business relationships with many suppliers and also have such possibility as to
control the range and to form it.
The franchisor purchases products from various
suppliers in such relationships and sells it to franchisee, who carries out
retail sales of this product.
The key point of this kind of franchising relationship
is the franchiser’s brand, uniformity and corporate network, which allows
recognizing the seller.
