Successful businesses like Exxon, Coca-Cola, and Ford have all taken advantage of the distribution franchise model that accounts for a larger percentage of retail sales than the business format franchise.
A distribution franchise is beneficial because it gives franchisors access to an established local market that allows successful franchisees to increase sales based on limited competition, customized service, and a focus on product distribution.
What is a Distribution Franchise?
A distribution franchise is a contract in which a franchisor gives the franchisee the right to distribute or sell a specific product on its behalf.
Under this arrangement, the franchisee becomes the exclusive or semi-exclusive distributor of the franchisor’s product. Similar to a business format franchise, the franchisor licenses the franchisee with the right to use their trademark, logo, and trade name. However, a distribution franchise is distinct from a business format franchise because it does not adopt the franchisor’s operational distribution system. It maintains its own local identity.
A distribution franchise primarily distributes large products including but not limited to:
- Cars
- Computers
- Appliances
If you are looking to increase your sales of these types of products, a distribution franchise would be ideal for you.
How Can a Distribution Franchise Increase your Sales?
A distribution franchise can increase your sales through:
1. Limited Competition
A distribution franchise usually assigns a franchisee to an exclusive territory for business. An exclusive territory is a limited geographic area in which a franchisor covenants to not establish another franchise that offers similar goods and services. The franchisor’s territory terms are outlined in their franchise disclosure document. This arrangement limits competition for the franchisor’s products in these areas, thus enabling a franchisee to increase their product sales.
2. Customized Service in Local Markets
Under a distribution franchise, although a franchisee adopts the trademark, logo, and trade name of the franchisor, the franchisee still maintains their local identity which affords them flexibility with customized service for local clientele.
Additionally, if required, the franchisee provides pre-sale and post-sale services for the franchisor’s products. Therefore, although the franchisee represents the franchisor’s image, the franchisee is still largely responsible for the system through which they run their business.
A distribution franchisee’s ability to provide customized marketing and service increases its customer base and thus improves sales.
3. Focus on Product Distribution
A distribution franchise accounts for a larger percentage of retail sales than a business format franchise. This is because a distribution franchise’s primary focus is on the sale of the franchisor’s products and not the franchisor’s operational system.
This focus enables a franchisee to obtain quicker sales as they are bringing the franchisor’s products to market within their own established system.
A Distribution Franchise Can Improve Your Business
If your distribution franchise makes higher sales, this increases the royalties you receive and thus improves your business. Do not hesitate to consider this lucrative option!
If you are looking to expand your business through a distribution franchise, please contact us to discuss this franchising option.