In business, it
may get be confusing having a clear distinction between a franchise and a
corporation. Many individuals are indecisive when it comes to making a choice
on which course to take when it comes to establishing one of these forms of
business. Some of the main differences between a franchise type of business and
a corporation are listed below:
The
franchising idea is a method used to
expand business with the distribution of goods and services through the
licensing relationship agreement. Owning a franchise provides various benefits
such as a business growth, which might not have been possible to achieve since
all funding is under the franchisees. The franchise
also continues growing in popularity making the business name hold more weight
due to the many branches.
A franchisor is
expected to handle all the legal formalities of the business, and have a plan
that can be implemented towards a successful brand. Convincing franchisees on
the idea of the business is up to the franchisor (as a way of ensuring
individuals gets the most out of their investments). Despite being the decision
makers and concept creator, franchisees can be involved in any changes they
wish to make on the brand to ensure benefits from the franchise.
A corporation is a business entity
that is owned by stockholders (or shareholders) that has a board of directors
who oversee the activities of its organization. As an individual owning a
corporation, the full power and control over your business and all changes made
do not need some form of negotiations as compared to franchises. This means you
have free will to change the products and services offered without involving
franchisees.
Most
corporations have a board of directors that handle different segments of the
organization in order to achieve smooth operations of the business. A
corporation has shareholders and investors who offer monetary input to the
organization, but the liability is limited to the corporation as the power of
the organization.
When
a chain (which is defined by
two or more retail stores having the same ownership and products or services)
is corporate-owned, the parent company is solely responsible for all stores'
business-related activities. From picking retail locations to hiring employees
to operations to tax planning. While most of the biggest food brands in the
world offer franchising opportunities, Chipotle and Starbucks are two of the
most famous examples of companies where all stores are corporate-owned.
When
a company decides to go the franchise route, it licenses its intellectual
property, business procedures, business model and brand to a franchisee that
then owns and operates the store. The franchisee pays an upfront cost and
ongoing royalty fees to the franchisor and must follow the corporate policies
set in place by the franchisor. A federal disclosure document (FDD) outlines
the franchise agreement between the parties and essentially serves as the sales
contract. Most fast food restaurants and retail brands offer franchise
opportunities.
“Our greatest weakness lies in giving up. The
most certain way to succeed is always to try just one more time.” (Thomas
Edison)[i]
[i] Sources used:
·
“Corporate Stores vs. Franchise Stores”
·
“Difference between Franchise and Corporation “by
Difference Between.net
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