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

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

• Organized independent trade, made up of franchises and associated cooperative businesses,
• Isolated independent retailers,
• 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 forms of commerce?

Organized independent trade

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

Independent and organized businesses fall into two categories:

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

Franchising

Franchising began in the 1930s. It involves acquiring the operating rights of an existing business. This type of business developed in the 70s and has been growing ever since.

It's an agreement between a franchisor and a franchisee. This agreement enables the franchisee to sell the franchisor's products and services.

In franchising agreements, it is more common for the franchisee to pay a percentage of sales 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.

Cooperative and associated trade

Created in France in 1895, the cooperative and associated business model is often used when retailers wish to retain their independence. These retailers join forces to form a cooperative and associated group. According to the Fédération du commerce coopératif et associé, in 2018, this type of business accounted for more than 30% of France's retail trade, spread across 22,600 companies.

In order to ensure a sustainable future, the retailers who belong to this type of business are all co-owners. Members work together on the following issues

• strategy development,
• group governance.

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

Adopting this mode of operation enables merchants to pool their tools and know-how. This enables them to build up an extensive network and increase their market share in their sector.

Examples of retail chains include various store 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.
• Sports: Sport 2000, Intersport, etc.
• Driving schools: ECF, CER France, etc.

Isolated independent retailers

Isolated independent shops enable their owners to be more independent. It combines the following characteristics

• a small or medium-sized outlet,
• an individual with merchant status,
• a structure managed autonomously by the retailer.

There are two types of independent shopkeeper:

• 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 independent retailer enjoys a number of freedoms in the management of his business. These include the ability to:

• set his own selling prices;
• select his suppliers, the references he wants and the quantities;
• choose the name of his brand;
• choose the legal status (SA, EURL, SARL, etc.).

If you want to set up a business in this way, you'll enjoy considerable management freedom. However, the independent, stand-alone business model is tending to decline in favor of cooperative and associated businesses, and integrated businesses, also known as "succursalist" businesses.

Integrated or chain stores

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

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

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

Examples of the most common integrated retail chains include

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

The advantages and disadvantages of different types of stores

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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 undergoing retraining 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 project.