What is the difference between Franchise and Chain?

Difference Between Franchise and Chain

The terms ‘Chain’ and ‘Franchise’ are often used interchangeably, but there is a lot of difference between them. The consumers don’t have to stress so much about it, but if you are thinking of investing in one of them, you should have a proper and clear idea about ‘Franchise’ and ‘Chain.’ Here we will make you understand the main Difference Between Franchise and Chain.

A franchise is a business model where a brand is operated at several different locations by separate entrepreneurs. Franchise refers to a business model where the separate entrepreneurs need to pay for acquiring the license or intellectual property for the brand.

The franchise business model involves the agreement between franchisor and franchisee. The franchiser establishes the brand name or trademark of the business, while the franchisee is the one who pays the initial fee to operate the business under a particular brand name or trademark and can start a business at a different location.

A chain is the business model, which operates under only one parent company and functions at different locations. In this business concept, only one organization manages and operates the entire business.

All the business based on chain model shares a similar brand and has got the central management, which manages all the stores. Best examples of stores that are running on a chain business model are Walmart and Starbucks.

Difference Between Franchise and Chain

• A chain is a group of outlets or stores owned by a single company that can be spread nationwide or worldwide, while a franchise is a business model where one company or individual grants rights to another party to use its trademark or trade-name.
• The chain business model is owned by the single owner, while in the franchise business model, there are separate owners at different locations.
• In the Chain business model, the risks are accepted by the single party, while risks are shared between franchisor and franchisee.

Franchise and chain are the two business models, where the chain is operated by the central management system, whereas the different owners operate the franchises at various locations. We hope you have now got a clear idea about the two business models. This is the key difference between a Chain and a franchise.