20+ Difference between Franchise and Chain (Explained)

The main distinction between a chain and a franchise is that a chain has a single owner running every site, whereas a franchise has several owners running each store individually. Franchises and chains are two dissimilar company concepts equally significant in today’s world.

A chain is a collection of shops owned by the same business and located worldwide.

On the other hand, a franchise is a business model in which one party allows another party the authority to use its trademark or trade name and specific operational procedures and business systems.

Comparison Between Franchise And Chain

Parameter	Franchise	Chain
Definition	Through a written contract, the franchisee purchases the right to resell the franchisor’s goods and services in this type of business.	A chain refers to a collection of businesses under the same name located all over the country or the world and selling the same goods or services.
Based on	A connection between a franchise owner and an associated dealer.	Several locations, regardless of location.
Troubles	The franchisee assumes a portion of the risk.	The parent corporation is responsible for any risk.
Possessed by	The franchisee, an outside party, is in charge of running the shop.	All of the units are owned and run by the main firm.
Profits	Between the franchisor and the franchisee.	The parent organization assumes all earnings and losses.
Expenditure	Possessed by both parties.	Brought on by the owner.
Workers	The franchisee is the one who hires the franchise’s staff.	The chain’s parent firm hires all of its employees.
Incharge	The firm and its activities are not entirely under the franchisor’s control.	Complete command of the company’s activities.
Example	One of the best examples of a supermarket chain is Walmart.	McDonald’s and Domino’s are two instances of franchises.

Major Difference Between Franchise And Chain

What exactly is Franchise?

Numerous prosperous companies and enterprises will provide qualified investors with franchising possibilities.

The franchisor can access as many sources of finance through a franchised firm as there are franchises. Franchisees are willing to cover the rest of the cost of running new store locations while still having some financial obligations.

These expenses cover everything from property to equipment to working capital to supplies and inventories.

Franchisees must abide by the franchise company’s corporate regulations and pay an ongoing royalty charge to the franchisor. The Financial Disclosure Document outlines franchisees’ rules (FDD).

Key Difference: Franchise

On the other hand, a franchisee owns a franchise location (an independent investor).

One of the main motives for businesses to franchise is to raise money to support brand expansion.

Compared to a comparable chain business, a franchise-owned store often has reduced overhead and lower operating costs.

The franchisor shares everything with the franchisees regarding a franchise model. Franchisees are independent investors; they must be “in the know” regarding the franchisor’s performance to make an investment.

What exactly is Chain?

A chain business is a group of shops (two or more) controlled by a parent company, providing identical products, adhering to the same corporate policies, and sharing a brand name. Wal-Mart serves as an example of a network of mass-market supermarkets.

Chains can work on a local, regional, national, or even worldwide level depending on the brand. Since chain stores are corporately owned, the parent company is responsible for their ownership and management.

The shops don’t have separate owners anymore. The parent business is responsible for any gains or losses incurred at each location. As a result, they oversee all corporate operations, hiring and firing personnel, and other duties.

Key Difference: Chain

The parent company completely owns and operates the chain stores on behalf of the shareholders.

Businesses that follow the chain store model must only turn to lenders or reinvest profits for finance.

A chain shop has higher costs because of its operations.

The earnings (and losses) and operational tasks remain inside the firm under the chain model.

Contrast Between Franchise And Chain

Ownership:

Franchise- Conversely, a franchisee (independent investor) owns a franchise location. Of course, there is a neutral position.

Businesses like McDonald’s have corporate-owned and franchise-owned restaurants within their network. Both company models must- adhere to the same standards and corporate directives.

Chain- On behalf of the shareholders, the parent business wholly owns and operates chain shops.

Funds:

Franchise- One of the primary reasons businesses choose to franchise is to raise money to support brand expansion.

Franchisees contribute to the franchise’s financial stability by making an initial investment and regular, predictable royalties. Franchise firms are often more likely to see faster expansion than their chain store equivalents, mostly because of finance.

Chain- Businesses that follow the chain store model are limited to borrowing money from banks or investing earnings.

Expenses:

Franchise– A franchise-owned store’s overhead and operating expenditures are often cheaper.

Chain- Chain stores typically have higher payrolls.

Monetary benefits:

Franchise- A franchise model involves the franchisor sharing it all with the franchisees. Franchisees are autonomous investors; they must be aware of the franchisor’s performance before making an investment.

Chain- The company’s operational tasks and revenues (and losses) remain under the chain model.

Power in the hand of:

Franchise- The firm and its activities are not entirely under the franchisor’s control.

Chain- The main company fully controls the business and how the chain stores are run.

Recruitment:

Franchise- Franchisees are responsible for hiring franchise staff with the help and guidance of the franchisor.

Chain- The parent corporation is responsible for the hiring and training of the staff at the chain of stores.

Polities:

Franchise- Franchisers set the rules for all franchisees.

Chain- In a chain, the rules are set by the owner.

Frequently Asked Questions (FAQs)

Q1. What are the similarities between a franchise and a chain?

The similarity between a franchise and a chain is that both want to maximize profits and have rules and regulations that must be observed.

Q2. List popular chain restaurants.

McDonald’s, Starbucks Coffee, Subway, Taco Bell, Burger King, Wendy’s, Dunkin’ Donuts, and Chick-fil-A are some of the popular chain restaurants.

Q3. How are a franchise and a branch different?

There are several differences between the two. The person who runs or manages the firm has a significant effect.

A third party or franchisee manages the company’s operations in a franchise. The corporation itself also operates a branch in the interim.

Q4. Does Starbucks come under a chain or a franchise?

Despite defying the franchise model of growth, Starbucks has expanded significantly and is now the largest chain of coffee shops in the world.

CEO between 1986 and 2000, then again between 2008 and 2017. Howard Schultz thinks that offering customers a high-quality product is important.

Q5. On what basis can a franchise be classified?

A franchise can be classified based on job or operator, management, retain and fast food, and investment.