Maybe you’ve never thought about it, or you thought they were the same, but there are differences between a chain and a franchise. All franchises are chains, but not all chains are franchises. Here are a few points to consider.
Chains
Some stores that have multiple locations are owned and operated by one company. This company takes care of all the hiring, training, supply and ordering of products, and marketing. The buck stops with head office. All stores are owned and managed by the company. Full responsibility for all operations is taken by the head office, including quality control and delivery of a consistent product or service.
The company takes all profits or losses. Expansion or reduction of stores is decided upon by the head office as well.
A few examples of stores that are chains and not franchises are Starbucks, Chipotle, and In-N-Out Burger. However, certain Starbucks stores that are affiliated with airports, universities, or within another store are franchises.
Franchises
With a franchise, the head office has control and responsibility for certain aspects of the business, but some of the risk and responsibility falls on the shoulders of the franchisee. This is part of the written contract that is made between franchisor and franchisee at the start of the relationship.
Each franchise location is run by the franchisee. Corporate headquarters supplies the marketing materials, training programs, and methods for running the business, but the success of the location has quite a lot to do with the individual who is running the operation.
For a franchise to expand, more investors are needed for growth. The profits of the company are shared via the franchisor and whatever incentive program is offered to franchisees. Very famous franchises include McDonald’s, Applebee’s, and 7-Eleven.
So now that you know the difference between a chain and a franchise, it’s time to consider more closely what kind of franchise are you looking for as an investment opportunity. For more information about franchises and how they work, you are very welcome to speak to our specialists at Franchise Maven. Our trained, professional staff is looking forward to hearing from you and will help you learn more about franchise ownership and how it can work for you.