Difference Between Franchise and Chain
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A franchise sells major business components such as actual products and services, business logo, and business model, whereby each franchise has a different ... Home About Archives ContactUs Resources DifferenceBetweenSimilarTermsandObjects DifferenceBetweenFranchiseandChain •CategorizedunderBusiness,Structure&Systems|DifferenceBetweenFranchiseandChain Intheonsetandgrowthofabusiness,manyimportantdecisionshavetobemade,suchastheroleofabusiness,ownership,typeofbusinessentityjusttomentionafew.Oneofthecriticaldecisionsabusinessmakesiswhetheritwantstodirectlyownalltheunitsorallowinvestorstobuysomeoftheunits.Thismeansthatwhateverdecisionismade,abusinesswillbecomeafranchiseorachain. WhatisaFranchise? Afranchiseisatypeofbusinesswherebytheownerssellsomebusinessrightstothirdparties.Someoftherightssoldinthistypeofbusinessare;thebusinessname,logoandbusinessmodel.Thefranchiser,however,willrequirethatthebusinessmodelstaysthesameandfactorssuchaspricing,businessmethods,andotherspecifiedfactorsremainthesame. Forapersontoinvestinafranchise,thefranchiseepaysaninitialfeewhichcoverstherightsofthebusiness,andoncethebusinessstarts,aroyaltyfeeispaidtothefranchiser.Thisiscalculatedbasedonapercentageofsalesmadeandcanbedonemonthly,quarterlyoronanannualbasis,dependingonthetermsstated. Whenselectingafranchisesystemtoinvestin,abusinesspersonshouldseetoitthatafranchise: Isabrandthatiswellrecognized Trainingcanbeofferedtothemanagementteam OffersInitialandcontinuingmarketingandadvertisingstrategies Havegreatqualityofproductsandservices OffersOngoinggeneralsupport Operatingasafranchisehassomeadvantages Reductionofriskthroughthefranchiser’sexperienceandknowledge Ongoingsupportthroughadvertising,constanttrainingandbuyingequipmentandmarketing Theuseofawell-knowntrademarkreducestheworkloadonbrandrecognitionandmarketingstrategies. Researchanddevelopmentburdenislessenedasitistransferredtothefranchiser Lessfinancialburdenasmostfranchisesoffersfinancingoptions.Banksarealsomorewillingtolendtowell-knownfranchises. However,therearesomedisadvantagesoffranchising Thefranchisingapplicationprocesscanbelongandtedious,andtherequirementsforconsiderationcanbeverydemanding. Anydifficultiesfacedbythefranchiserarepasseddowntothefranchisee. Thefranchiseeisnotanindependentbusinessbutiscontrolledbythefranchiser Feesassociatedwithfranchisingsuchasroyaltiescanbehigh Theprofitissplitamongthefranchiserandthefranchisee WhatdoesChainmean? Achainisagroupofoneormorestoresthathaveoneowner.Thistypeofbusinesshasthesamename,sellthesameproductandfollowthesamesetpolicies.Thismeansthatthechainretainstotalcontrolofeachstore. Someoftheadvantagesofoperatingchainstoresare: Thechainsretainfullownershiprights Thereisaneconomyinadvertisingasitisnotnecessaryforeachbranchtoadvertise Itiseasytoidentifyanunprofitablebranch,andeithercloseitormoveittoanotherlocation Chainsretainalltheprofit,astherearenomiddlemen Thecostofdistributionislessaswholesalersareeliminated Uniformityinprice Chains,however,havesomedisadvantages Itmaybedifficulttoexercisecontroloverallthechains Thechainbusinesscarriesalltheriskasthereisnorisksarepassedtoinvestors Itisexpensivetorunchainstores SimilaritiesbetweenFranchiseandChain Bothaimatprofitmaximization Bothhaveasetofpoliciesandprocedurestobefollowed DifferencesbetweenFranchiseVs.Chain OwnershipinFranchiseVs.Chain Afranchisesellsmajorbusinesscomponentssuchasactualproductsandservices,businesslogo,andbusinessmodel,wherebyeachfranchisehasadifferentowner. Achain,however,expandsonitsownandfullyretainstheownershipofthebusiness. Risksharing Thebusinessriskissharedbetweenthefranchiserandthefranchiseewhileachainassumesalltherisksonitsown. ProfitsharinginFranchiseVs.Chain Whileafranchisesplitstheprofitbetweenthefranchiserandthefranchisee,achainretainsalltheprofitmadeinthebusiness. Businesscontrol Afranchisedoesnothavefullcontrolofthebusinessandworkhandinhandwiththefranchiser,achain,ontheotherhand,hasfullcontrolofthebusiness. BusinessexpensesinFranchiseVs.Chain Theexpensesinafranchisearesharedbetweenthefranchiserandthefranchiseewherebythefranchisercarriesmostworkinvolvingthebrand,suchasmarketingandadvertisingexpenses.Achain,onthehand,incursallthebusinessexpenses. BusinessPoliciesinvolvedinFranchiseVs.Chain Whilebusinesspoliciesinafranchisesuchasresponsibilities,procedures,andrightsaresetoutbythefranchisertoensureconsistency,achainsetsitsownbusinessrulesandpolicies. Franchisevs.Chain:ComparisonTable SummaryofFranchisevs.Chain Abusinesspersonwhowouldliketostartorexpandabusinesswouldhavetochoosebetweenafranchiseandachain,basedonfactorssuchasspreadingofrisks,costsinvolvedinstartinganewbusiness,fullbusinessownershipretentionandmeansonhowtoexpandabusiness.Bothareidealbusinessmodels,basedonaperson’spreference. AuthorRecentPostsTabithaNjoguTabithagraduatedfromJomoKenyattaUniversityofAgricultureandTechnologywithaBachelor’sDegreeinCommerce,wherebyshespecializedinFinance.Shehashadthepleasureofworkingwithvariousorganizationsandgarneredexpertiseinbusinessmanagement,businessadministration,accounting,financeoperations,anddigitalmarketing.LatestpostsbyTabithaNjogu(seeall) DifferenceBetweenProfitCenterandInvestmentCenter-July2,2022 DifferenceBetweenAnti-TrustandAnti-Competition-June6,2022 DifferenceBetweenStocktakingandStockControl-June6,2022 SearchDifferenceBetween.net: CustomSearch Helpusimprove.Ratethispost!Loading... EmailThisPost :Ifyoulikethisarticleoroursite.Pleasespreadtheword.Shareitwithyourfriends/family. DifferenceBetweenFranchisingandLicensing DifferenceBetweenFranchiseandCorporation DifferenceBetweenHorizontalIntegrationandVerticalIntegration DifferenceBetweenTrustandCompany DifferenceBetweenResidualRiskandInherentRisk Cite APA7 Njogu,T.(2019,June24).DifferenceBetweenFranchiseandChain.DifferenceBetweenSimilarTermsandObjects.http://www.differencebetween.net/business/difference-between-franchise-and-chain/. MLA8 Njogu,Tabitha."DifferenceBetweenFranchiseandChain."DifferenceBetweenSimilarTermsandObjects,24June,2019,http://www.differencebetween.net/business/difference-between-franchise-and-chain/. 1Comment EvanRuis April22,2020•12:29am Onedifferencebetweenafranchiseandachainisthatafranchisespreadtheriskoffailurethroughouttheownersachaintheriskisallontheownerofthechain.Anotherdifferencesbetweenfromachainandafranchiseisthatachainhasoneownerandafranchisehasmultiple.Andonemoredifferencefromafranchiseandachainisthatafranchisesplitstheprofitbetweenthefranchiserandthefranchiseeandwithachaintheownercollectsalltheprofitmadeinthebusiness. Reply LeaveaResponse CancelReply Name( required) Email( required) Website Pleasenote:commentmoderationisenabledandmaydelayyourcomment.Thereisnoneedtoresubmityourcomment. Notifymeoffollowupcommentsviae-mail Writtenby:TabithaNjogu. andupdatedon2019,June24 References:[0]SamuelsonW.&ChatterjeeK.GameTheoryandBusinessApplications.SpringerScience&BusinessMediaPublishers,2013. https://books.google.co.ke/books?id=iIpCjX9FSToC&pg=PA169&dq=Franchise+vs.+Chain&hl=en&sa=X&ved=0ahUKEwjY5cCQlOreAhXlk4sKHbPZDyMQ6AEIXzAK#v=onepage&q=Franchise%20vs.%20Chain&f=false[1]TuunanenM.,WindspergerJ.,CliquetG.,&HendrikseG.NewDevelopmentsintheTheoryofNetworks:Franchising,AlliancesandCooperatives-ContributionstoManagementScience.SpringerScience&BusinessMediaPublishers,2011. https://books.google.co.ke/books?id=io93vTdMWYkC&pg=PA59&dq=Franchise+vs.+Chain&hl=en&sa=X&ved=0ahUKEwjY5cCQlOreAhXlk4sKHbPZDyMQ6AEIUDAH#v=onepage&q=Franchise%20vs.%20Chain&f=false[2]FrankH.,PerrigotR.,&TerryA.HandbookofResearchonFranchising-Researchhandbooksinbusinessandmanagementseries.EdwardElgarPublishers,2017. https://books.google.co.ke/books?id=RR06DwAAQBAJ&pg=PA443&dq=Franchise+vs.+Chain&hl=en&sa=X&ved=0ahUKEwjY5cCQlOreAhXlk4sKHbPZDyMQ6AEISzAG#v=onepage&q=Franchise%20vs.%20Chain&f=false[3]Imagecredit:https://en.wikipedia.org/wiki/Domino%27s_Pizza#/media/File:Domino%27s_Outlet.jpg[4]Imagecredit:http://www.thebluediamondgallery.com/handwriting/images/franchise-businesses.jpg ArticlesonDifferenceBetween.netaregeneralinformation,andarenotintendedtosubstituteforprofessionaladvice.Theinformationis"ASIS","WITHALLFAULTS".Userassumesallriskofuse,damage,orinjury.Youagreethatwehavenoliabilityforanydamages. 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