The choice of business form is of paramount importance.
It’s a decision that directly influences management, brand visibility and the level of support each outlet will receive.
There are three main types of business form – the isolated independent, the integrated and the organized independent – to understand their nuances and identify the one that will propel your business project to success.
What’s a form of commerce?
A form of trade is an organizational structure that determines how a commercial enterprise is operated and managed.
These structures vary according to the degree of independence of the outlets, the ownership of the brands, and the relationships between the players in the network.
The choice of business form is essential for entrepreneurs, as it has a direct impact on the management of the business, the visibility of the brand, and the level of support enjoyed by each outlet.
What is the role of shops?
Whatever the form of commerce, its fundamental role is to connect producers and consumers by facilitating the exchange of goods and services.
It’s an economic pillar that contributes to growth by promoting the efficient distribution of products in the marketplace.
In addition to its economic aspect, commerce plays a social role by creating jobs, influencing consumer habits, and contributing to diversity and competitiveness in the marketplace.
Different types of business?
There are three major forms of commercial network organization: isolated, integrated and organized independent. A thorough understanding of the various types of business is essential for the retailer, guiding him in the choice of a path suited to his business aspirations and objectives.
Organized independent trade
There are two distinct types of organized independent business: franchising and associated cooperative businesses.
These models offer independence under certain conditions, enabling the retailer to run the business autonomously.
The franchise
Franchising, which first appeared in the 1930s and has been widely developed since the 1970s, involves acquiring the operating rights of an existing business.
The agreement between the franchisor and the franchisee enables the latter to sell the franchisor’s products and services.
In France, franchising is growing steadily, representing sales of over €67 billion in 2019.
Examples of popular franchises: McDonald’s, Brioche Dorée, Accor, Alain Afflelou.
Cooperative and associated trade
Created in 1895, the cooperative and associated trade preserves the independence of the retailer. They join forces within a cooperative group to develop strategies and govern the group. In 2018, this form of commerce accounted for over 30% of retail business in France.
Some examples of this type of business: Réseau U, Gédimat, Sport 2000, ECF (auto schools).
Isolated independent business
It is characterized by sales outlets owned by the retailer without affiliation to a network.
This form of trade gives greater autonomy to the retailer, who manages a small or medium-sized structure with complete independence.
There are two main types of merchant: wholesalers, who act as intermediaries between producers and distributors, and retailers, who are in direct contact with the end consumer.
Integrated or chain stores
Integrated stores, or “succursalistes”, are made up of outlets controlled by a family or investor group.
These outlets fulfill two distinct functions: the wholesale function via a central purchasing unit, and the retail function.
This expanding model is well represented in sectors such as mass retailing, specialized superstores and department stores.
Examples of integrated chains: Casino, Carrefour, Décathlon, BHV.
Advantages and disadvantages depending on the type of business
Choosing the right form of business depends on the vision you have for your project.
Complete autonomy, the social benefits of salaried employment, or the combination of independence and network support: each option has its merits.
By analyzing your needs, your vision and your financial means, you can make an informed choice to ensure the success of your business.
To make the right choice, it is crucial to understand the advantages inherent in each form of business:
The isolated independent retailer
This type of business is particularly suited to those with a clear vision and management experience.
It is ideal for specialized stores, where competition from the big chains is less of a concern.
Autonomy in defining your business strategy, the possibility of creating your own brand, and the absence of entry fees are all major advantages.
Disadvantages : However, this independence is not without its challenges.
You have to build up your reputation on your own, and bear all the costs associated with the business.
Integrated or branch
This form of business offers advantages such as fixed income, extended social protection, easier customer loyalty and brand awareness.
Disadvantages: On the other hand, the manager benefits little from the company’s profits, must follow the parent company’s sales policy and may encounter difficulties in managing teams.
Organized self-employed
Organized independent businesses combine the advantages of independence and network integration.
Franchising is a common example.
This form of commerce, regulated by a contract between franchisor and franchisee, offers authorization to use a well-known brand, a training program, full support, resources and technical assistance.
Disadvantages: In return, the applicant is dependent on the franchise for product selection and sourcing, and must pay entry fees and operating royalties.
What’s the most popular form of commerce?
Franchising is a popular and successful form of business. First introduced in the 1930s and widely developed since the 1970s, franchising is a contract linking a brand-owning company, the franchisor, to independent traders, the franchisees. This model offers the reproduction of commercial success, with the franchisor providing know-how and ongoing assistance in exchange for entry fees and royalties. Cooperative and associated businesses, although less widespread, also account for a significant proportion of French retailing, offering retailers the possibility of joining forces to pool resources and know-how.
By joining an organized independent trade network, the retailer retains his or her legal independence while benefiting from the reputation of a brand name.
These networks provide a tried-and-tested method, ongoing assistance, and avoid the isolation often encountered by the retailer.
Opting for this form of business depends on the objectives, resources and specific vision of each retailer.
The decision to join a commercial network is a major asset in securing a business start-up project, with survival rates 5 years higher than those of an isolated business.
