What type of business should you start? Features and benefits to help you make the right choice!

If you want to set up a business, you need to decide which type of business best suits your structure. There are three main types of business:

• Organised independent businesses, made up of franchises and associated cooperative businesses,
• Isolated independent businesses,
• integrated or branch-based businesses.

Whatever business you plan to undertake, you're bound to find a structure that comes close to one of these three forms.

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What are the 3 types of business?

Organised independent businesses

What we call an organised independent business is a type of business that allows the person running it to have an independent structure. They run their own business as they wish, subject to certain conditions.

Independent and organised businesses fall into two categories:

• Franchises, a type of business that involves taking over the operating methods of an existing business;
• Cooperative and associated businesses, which bring together entrepreneurs from the same sector and get them to work together.

Franchising

Franchising began in the 1930s. It involves acquiring the rights to operate an existing business. This type of business developed in the 1970s and has been growing ever since.

It is an agreement between a franchising company and a franchised company . The agreement allows the franchisee to sell the franchisor's products and services.

In franchise agreements, it is more common for the franchisee to pay a percentage of its turnover to the franchisor.

In France, franchising is one of the most popular forms of business. It continues to grow, reaching 63.88 billion euros in total sales in 2020, according to the French Franchise Federation. France is the leading European country in terms of franchise networks, with 78,000 franchisees.

If you can't think of an example of a franchise, chances are you're a regular customer of one .

In the case of the French market, the most common franchises include :

• McDonald's or Brioche Dorée in the restaurant sector,
• Accor in the hotel sector
• Alain Afflelou in the optical sector.

Co-operative and associated trade

The cooperative and associated form of commerce, created in France in 1895, is often used when retailers wish to retain their independence. These retailers join together in a cooperative and associated grouping. According to the Fédération du commerce coopératif et associé, in 2018, this type of business accounted for more than 30% of retail trade in France, spread across 22,600 businesses.

To ensure a sustainable future, the retailers who are members of this type of business are all co-owners. The members work together on the following points

• strategy development
• group governance.

All major decisions concerning the cooperative are voted on by the member retailers.

Adopting this operating model enables retailers to pool their tools and know-how. This gives them a large network and greater market share in their sector of activity.

Examples of retail chains include various shop networks from different sectors. These include

• Supermarkets: Réseau U (Utile, U Express, U Drive, Super U, Hyper U), Leclerc, etc.
• DIY and building materials: Gédimat, Weldom, etc.
• Sport: Sport 2000, Intersport, etc.
• Driving schools: ECF, CER France, etc.

Isolated independent retailers

Isolated independent shops allow the retailer to be more independent. They have the following characteristics

• a small or medium-sized sales outlet,
• a natural person with retailer status
• a structure managed autonomously by the retailer.

There are two types of sole trader:

• Wholesalers: they act as intermediaries between producers and distributors. They always buy products in large quantities in order to gain a price advantage, and resell these goods in smaller quantities to independent retailers.
• Retailers: in contact with the end consumer, retailers buy products from wholesalers.

The isolated independent trader will have a number of freedoms regarding the management of his business. These include the freedom to:

• set their own selling prices;
• select their suppliers, the products they want and the quantities;
• choose the name of their brand;
• choose their legal status (SA, EURL, SARL, etc.).

If you want to set up your business in this way, you will have a great deal of management freedom. However, the independent, stand-alone business model is tending to decline in favour of cooperative and associated businesses and integrated businesses, also known as chain stores.

Integrated or chain stores

Integrated retailing takes the form of a number of outlets, all owned by a financial group or an individual. These outlets have two distinct functions:

• wholesale, in the form of a central purchasing unit,
• retailing, in the form of more traditional outlets.

This type of business is very common and is tending to develop more and more.

The most common examples of integrated stores include

• In food superstores: Casino, Carrefour, Intermarché, etc.
• Specialist superstores: Décathlon, Conforama, etc.
• Department stores: BHV, Galeries Lafayette, etc.

The different types of store: advantages and disadvantages

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Whatever the structure you want to develop, you need to know which type of business will suit you best. Whether you're an employee changing careers or an entrepreneur looking to start up or expand your business, one of these types of business will appeal to you more than another.

It's important for the viability of your project to choose the type of business best suited to your situation and your project.