FRANCHISE vs. CHAIN: WHAT'S THE DIFFERENCE?

Chain stores are fully owned and managed by the parent corporation on behalf of the shareholders. A franchise location, on the other hand, is ... SkiptocontentSkiptoprimarysidebar Locations FRANCHISEvs.CHAIN:WHAT’STHEDIFFERENCE? September2,2021Manypeoplethinkoffranchisesandchainsassynonymous,butthey’renot.Learnthemajordifferencesbetweenfranchisevs.chainandwhichoneallowsyoutobetheownerofyourshop. WHATMAKESACHAIN Achainbusinessiscomprisedofagroupofstores(twoormore)thatpossessthesamebrandname,adheretothesamecorporatepolicies,sellthesameproducts,andareallownedbythesameparentcompany.Wal-Martisanexampleofamassretailsupermarketchain.Chainbusinessesmaybelocal,regional,nationwide,orglobal,dependingonthebrand. Sincetheyarecorporate-owned,chainstoresareownedandoperatedbytheparentcompany.Thestoresdonotretainindependentowners.Allprofitsorlossesaccruedateachlocationareassumedbytheparentcorporation.Subsequently,theyareresponsibleforrunningdailyoperations,managingemployees,andeveryotheraspectofthebusiness. WHATMAKESAFRANCHISE Manysuccessfulbusinessesandcorporationswillofferfranchisingopportunitiestoqualifiedinvestors. Throughafranchisedbusiness,thefranchisorcantapintoasmanystreamsofcapitalasithasfranchisees.Whiletheystillbearsomefinancialresponsibility,themaincostsofopeningnewstorelocationsareincurredbythefranchiseesandpaidoutthroughfranchisefees,coveringeverythingincludingrealestate,equipment,inventory,workingcapital,andmuchmore.Franchiseesmustpayanongoingroyaltyfeetothefranchisor,aswellasfollowthebusinessprotocolandcorporatepoliciessetbythefranchisecompany. TheguidelinesthatthefranchiseesmustadheretoarelaidoutintheFinancialDisclosureDocument(FDD).Uponsigningafranchiseagreement,eachfranchiselocationisrequiredtofollowtheoutlinedguidelines;unlessotherwiseindicated.Theseguidelinesincludeoperatingprocedures,designatedhoursofoperation,products,employmentpractices,andmore. THEDIFFERENCES Simplyput—withinachainbusiness,aparentcompanyownseachlocation.Withafranchise,differentstoresorbranchesareownedbyseparateindividualswhoaresolelyresponsiblefordailyoperations.Stillunsureofthefinerdistinctionsbetweenfranchisevs.chain?Let’sdiveinabitfurther. OWNERSHIPSTRUCTURE Chainstoresarefullyownedandmanagedbytheparentcorporationonbehalfoftheshareholders.Afranchiselocation,ontheotherhand,isownedbyafranchisee(anindependentinvestor).Thereis,ofcourse,amiddleground.CompanieslikeMcDonald’shavefranchise-ownedrestaurantsandcorporate-ownedrestaurantswithintheirnetwork.Ultimately,bothbusinessformatsmustfollowsimilarguidelinesandcorporatepolicies. FINANCING Gatheringfundstofinancebrandgrowthisoneofthebiggestincentivesthatpromptcompaniestofranchise.Businessesthatmaintainachainstoremodelmustseekfinancingsolelythroughlendersorreinvestedprofits.Franchiseespayinitialinvestmentfeesandpredictableongoingroyaltiesthathelpsustaintheexpendituresofthefranchise.Asawhole,franchisebusinessesaremorelikelytoexperiencefastergrowththantheirchainstorecounterparts,mainlyduetofinancing. Forthoseseekingtoopentheirownbusinessasafranchiseowner,initialinvestmentcostswillincludethefranchisefee,marketingfees,travel,etc.Byavoidingthepotentialfinancialpitfallsofanindependentbusinessventure,buyingafranchiseismuchmorecost-friendly.And,ifyourequireexternalfinancingtomakeyourbusinessdreamsareality,theprobabilityofsecuringaloanismuchhigherwithafranchisebrandbackedbyastrongreputationandasustainablegrowthrecord. COSTOFDOINGBUSINESS Afranchise-ownedstoretypicallyhasloweroverheadandfewercostsofoperationsthanasimilarchainstore.Forexample,thefranchiseecanactasthemanagerandtakecareofcostlyexpenseslikeserving,cleaning,etc.Alternately,mostchainstoreshavelargerpayrolls. PROFITS Itisimportanttoknownotonlyhowmuchastoremakesbutwherethemoneygoes.Withinthechainmodel,theprofits(andlosses)andoperationalfunctionsstaywithinthecorporation.Whenitcomestoafranchisemodel,thefranchisorshareseverythingwiththefranchisees.Franchiseesareindependentinvestors;theyhavetobe“intheknow”aboutthefranchisor’ssuccessbeforeinvesting. CLAIMYOURFUTUREWITHFRANCHISING Franchisingisamutuallybeneficialarrangementbetweenthefranchisorandyou,thepassionate,dedicatedentrepreneur.Franchisorsbenefitfromexpandingtheirinfluenceandcustomerbase,whilethefranchiseecancapitalizeonabrand’stime-testedbusinessmodel,popularity,andmarketingnetwork. Franchisingisidealforambitiousentrepreneurswhodon’twanttostarttheirbusinessesfromscratch.Thetimeandefforttodevelopawinningformulahasbeenestablishedbythecorporation,soyoucanstartyourjourneywithalltheadvantagesofaworld-classbrandthatisinvestedinyoursuccess. FINDYOURWAYWITHWAYBACKBURGERS Currentlyoperatinginover32statesandinternationallocations,WaybackBurgershasdemonstrateditscommitmenttoinnovationandgrowthasaleaderinthefast-casualrestaurantindustry.Weapproachfoodandbusinesswiththesamehonest,uncomplicatedphilosophy,andwelcomelike-mindedentrepreneurstojoinourfamily. VisitustohearourfranchiseetestimonialsandlearnmoreaboutopportunitieswithWaybackBurgersinyourarea.