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Difference between Franchise and Chain
Franchise is a business where the Franchise purchases the right to sell the products and services to the capitalist in a legal way. A "Chain" is a cluster of a particular firm of the same brand, contributing the same product or services spread worldwide.
What is a Franchise?
A Franchise is a type of permission that permits franchise access to a franchisor’s exclusive business knowledge, processes, and logo, allowing the franchisee to sell a product or service under the franchiser’s business. Franchising is a popular way to start a business for entrepreneurs. A huge advantage of buying a franchise has the means to establish a brand name.
Following are the characteristics of a franchise −
They have their stores at excellent locations such as in busy city and crowded location where the store is attracted to all the people who come across.
The franchisor knows where to do things for better profit for their business. The franchisor has built a very successful business till this date and they seem to have a good profitable future.
The franchise business is not afraid to take any effective changes in their company and a change is given to their business for betterment of their business.
What is a Chain?
A chain is when a group of establishments that shares a joint owner who owns most of the establishment. It is a retail outlet in which many locations share a brand. Moreover, they have central management, which is management that manages all the stores. Chains can exist across the globe.
Following are the characteristics of a chain −
They have very similar architectures and similar infrastructure and design.
They have a lot of variety in their products and their price is uniform.
The chain stores are known differently in different countries.
Difference between Franchise and Chain
The following table highlights the major differences between a Franchise and a Chain −
Factors | Franchise | Chain |
|---|---|---|
Owners | A Franchisee can have only one
owner. | A Chain is a group of one or more
stores that have only one owner. |
Risk Taking | The risk is being shared between the
franchisor and franchisee. | Chain agrees to take all kind of
risks on its own. |
Profit sharing | The profit is being shared between
the franchisor and franchisee. | Here the profit is gained by the
owner himself. |
Business control | Here both the franchisor and
franchisee have control. | The owner has full control on this
firm. |
Policies | The policy is assured by the
franchisor to make sure business
consistency throughout the period of
time. | Chain has its own rules and
policies. |
| Business
expense | Usually franchisor is responsible and
takes care of the expenses related to
branding and various operating
expenses are handled by franchisee. | It takes care of its own expenses. |
| Employee | The franchisee hire the employers of
franchise. | The parent company hires the
employers of chain. |
| Decision maker | Franchisors are the decision maker in
the business. | They themselves make decision
for them. |
| Role | A franchisor is a person or company
that grants a license to the third party
which is also known as franchisee. | Its role is to look after product
development, marketing,
operations, distribution, finance
and customer service. |
| Purpose | It gives open idea towards product
and services. | Its goal is to improve efficiency by
coordinating the efforts of chain
and to increase production. |
| Scope | The scope of franchising is very high
because it can sell the brand without
promoting it as it already has brand
value. | The scope of chain is quite broad. |
Conclusion
Chain and Franchise are two different types of business model. A Chain is operated by a central management system, while a Franchise is operated by various entrepreneurs.
Ownership is the main difference in chain and franchise. The franchise stores always have different owners. Whereas chain stores have a single owner for all business worldwide. In matter of risk sharing a chain aggress to take all risk at its own. Whereas the franchiser and franchisee shares the risk equally.
In a chain, the owner gains all the profit; while in a franchise, the franchisor and the franchisee shares the profit among themselves. The chain has full control over its business, while a Franchisee does not have full control over its business. In the matter of business expenses, a chain takes care of all the expenses; while in a franchise, all the expenses are shared between franchisor and franchisee.
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