The Differences Between a Franchise and a Corporate Outlet


What are the differences between a franchise and a corporate outlet?


 


This is a good question because the answer carries some gray area as well as the obvious.


 


Successful concepts (and unfortunately, sometimes not so successful concepts) can grow through franchising a business by using OPM (other people’s money). Under the franchise model, it is the franchisor (the owner and distributor of the branded concept) that collects fees (both in terms of franchise fees and royalties) in exchange for allowing other people to use its commercial symbols and its system. This is a huge departure from the non-franchised growth model.


 


In the “non-franchised” or company owned model, a constant stream of capital and management talent is invested at corporate expense in order to keep the network growing. This, as well as the franchise model, is easy to fathom.


 


The large gray area appears when brand ownership creates a hybrid of both models by franchising some locations and owning others. For my investment dollar this is normally a bad bet because the owner/franchisor sends mixed signals regarding importance and loyalty. Franchisees usually feel slighted and unappreciated, and a growing resentment develops on both sides of the fence with the common “us/them” mentality. It is usually not a healthy mix.