We are continuing the discussion from our last post about franchises and chains. There are some important differences that a business owner should consider before committing to one or the other. In our last post, we used a restaurant expansion as an example, but we want to make it clear that these considerations apply to many different business types.
As an aside: In our example, the restaurant owner had once considered being a franchisee. The owner would do well to remember the broad concepts, but he should understand from the get-go that the two roles, franchisee and franchisor, are quite different. This is just one more reason to consult with an attorney before making any decisions.
Back to the franchisor-versus-chain-owner discussion: Financing is just one of many considerations.
Regulatory and legal
In order to open an additional location as a chain operation, the owner must follow state and local laws and regulations — both of which the owner may already be familiar with. Expanding by franchise adds another layer of compliance: Franchises are governed by both the state and the Federal Trade Commission.
Business owners must be careful, too, to remember that state laws differ. For example, Minnesota law handles the termination of the franchise relationship differently from North Dakota. Food and liquor laws may vary from city to city, especially for late-night restaurant and bar service.
Overall
This is not an exhaustive list. Nor is this a snap decision. With a team of qualified advisers, though, a business owner will understand the options and know the risks and rewards of each.
Source: SCORE.org, “Expanding Your Restaurant: Building a Chain vs. Franchising,” Rieva Lesonsky, accessed online June 19, 2015