Saturday, March 17, 2012

Franchise vs Chain Businesses

Any store you're familiar with will probably fall under one of two categories- a franchised business or a chain-owned business.
Franchised stores such as Hardrock Cafe, IHOP, Burger King, Hot Topic, and Jenny Craig license their good, services, and business-model. Anybody (Including you and I) can pay an amount to run these types of store. After paying this fee, the person setting up the store pays a fixed percentage of sales to corporate as long as the contract stands. Why would somebody want to pay a fee when they could just start-up their own business? Well, let's say you want to start a breakfast place but have little experience with doing so. Given this circumstance, you can turn to IHOP. They will tell you exactly how to run the business and maximize profits. The best part is that they have a steak in the business's successes- the more you make, the more they make.
In contrary, company owned chain stores such as Starbucks, J.C. Penney, and Gap are all owned by the main organization. The organization itself goes through the trouble of seeking capital, finding locations, etc. Nobody can simply own a Starbucks.
I intend to elaborate more about this in a future post; however, I hope this gives you a basic understanding about the difference.

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