To many consumers, chains and franchises can seem very similar, or even the same. However, they are quite different from one another. Here are the differences between franchises and chains:
What is a franchise?
Franchises are one pathway into entrepreneurship. With a franchise, a franchisee (the entrepreneur), buys the right to market and sell certain products and services from a franchisor (the person who owns the overall franchise) through a legal agreement. Fees and a share of the income are then paid to the franchisor over a specific period of time. The franchisee is in charge of operations, finances and HR for their specific location of the business.
There are several types of franchise agreements, all with different responsibilities, purchases, policies, procedures and rights. These terms are often outlined in the agreement and operation manual to make sure the franchise as a whole is consistent – a very important thing in franchising!
Examples of franchises
Most of us think of fast food when we think of franchise. However, lots of industries that have them, including automotive, real estate, accommodations, business services and retail. Tim Hortons, 7-Eleven, and RE/MAX Canada are all examples of a franchise.
Want to know more? Check out our blog post about the perks and snags of franchising.
What is a chain business?
A chain is a business that’s usually under one main corporate ownership, which opens and operates locations itself. This is the vital difference from a franchise. Franchise locations each have different owners, reporting to the main franchisor. But each chain location doesn’t have a different owner – each chain location is owned by the corporate office.
Examples of chain store
Some popular examples of Canadian chain restaurants and stores are Mark’s Work Wearhouse, Swiss Chalet, and Sobeys.
On the surface, chains and franchises can seem the same, but they are pretty different forms of small business ownership/operation. Here are the differences between a franchise and a chain