What Came First, the Franchise or the Franchisee?

Week 4 - Small Business and Entrepreneurship

Have you been losing sleep at night because you don’t know the difference between a franchise company owned store, and a store that is owned by a franchisee? Well take 2 minutes to read the following words and you will be sleeping like a baby in no time. A Franchise organization is where strict guidelines and formulas apply to the goods or services the company provides. Think of Subway, or McDonalds, or Starbucks. No matter where you go across the country, when you order a McDouble from McDonalds, it’s going to be the same thing. The signs on almost every Subway restaurant you go to will be in the same locations, and advertise the same sandwich special. A double half caff skinny grande moco moo moo at any Starbucks is going to have same ingredients, be presented in same cups, and usually cost the same. However, Some times you notice that the Starbucks coffee in Aspen, CO is a little more expensive than the Starbucks coffee in Lebanon, TN. The Subway in Mobile, AL may have a special on a 6” cold cut combo that you don’t find in New Haven, CT. You may be dumbfounded at a McDonald’s in Columbus, NC because you have to pay .53 cents for an ice water, and you never have to pay that in Cherokee, NC (true story). There is a simple reason for this variation among these franchise companies. Some are owned by the corporate parent company, and some are owned and operated by individual Franchisees. There are advantages to both being the franchisee, or a manager or a corporate owned company. Managers may find less stress just by following those strict methods and guidelines (and NOT having to pay that large price just for owning a name and formula). Others may want to pay for the franchise, so it gives them more freedom with hours of operation, and to not have to follow quota on advertising budget, etc. A good situation where this pro/con situation may come to play is in a season area. Probably better to own the franchise there so that you could control the hours of operation, for an example. Anyway… a recap, corporate owned franchise = consistent dollar menu. Franchisee owned franchise = .50 cent ice waters. Make sense? Sleep Well …