Franchise vs Small Business

Franchise vs Small Business

According to Fleury et al. (2019), a franchise is a business owned and operated by a person but overseen and branded by a larger entity such as a multinational or national company. A small business is a privately owned partnership, corporation, or sole proprietorship with few employees and less annual revenue than a regular-sized business or corporation (Mariotti & Glackin, 2014). However, the definition of a small business may vary based on business regulation bodies. For instance, The United States Small Business Administration defines a small business based on revenue and number of employees. It states that a small business is a firm with revenue ranging between $1 million to around $40 million and between 100 and 1500 employees. Jon Smith Subs is a fast food restaurant franchise specializing in fresh food prepared with fresh ingredients. The franchise has differentiated itself from competitors by ensuring that everything is cooked on order so that no frozen food is sold. The company has franchised since 2016 and is a leading casual dining restaurant.

How does your experience with a franchise you visited compare to your experience with a small business?

My experience with Jon Smith Subs was different from the experience with a small business because of the variety of products offered in the franchise. I realized that the franchise only sells one brand of products, and they do not change the product without the authorization of the franchiser. For instance, my friend requested the Chef to prepare a sandwich differently than usual, but the Chef informed us that they were required to strictly follow the restaurant’s menu. I also realized that all products’ prices were fixed, unlike in small businesses where the price may change upon bargaining.

How is your experience different from what you described last week when you discussed a small business when you do business with a franchise?

One of the things you may experience when doing business with a franchise is decision-making. In a franchise, the decisions are made by the franchiser. The performance of the franchise is also closely monitored by the franchiser, putting the franchise under pressure to perform (Khan, 2014). The second different experience is the management of operational costs. In a franchise, operational and startup costs are managed by the franchiser. Therefore, franchisees have lower startup investments compared to other businesses. However, the franchiser dictates the time of launching the franchise, thus limiting the control a franchise has over its operations. Franchises also follow a specific business model, which the franchiser dictates because they rely on resources provided to maintain business operations. A franchise’s method of operation is also different from other types of businesses. According to Pyasi (2010), the operation method followed by franchises is uniform across all franchisees, but every franchise seeks its business opportunities. Franchisees must also brand all products with the franchiser’s brand name and logo and maintain the franchiser’s trade name and trademark.

Why did you visit this business over another one like it?

I visited the business because it offers tasty and fresh food. The restaurant does not store food, and all ingredients are non-frozen, guaranteeing fresh food. I also like the restaurant’s services because the staff are friendly and process customer orders within the shortest time possible. The chefs are also highly qualified and ensure that all foods on the menu offer value for the customer’s money. I also visited the restaurants rather than similar ones because of their friendly prices.

What do the employees wear? What is the location? What does the sign look like?

Jon Smith Subs maintains a clean and hygienic environment where customers can enjoy their meals. The staff is also neat and wears black trousers and a black t-shirt with the company’s sign to differentiate themselves from customers and make it easier for customers to identify them whenever they need services. The restaurant is also strategically located in more than 38 locations internationally and locally. I visited the Congress Avenue branch in Lake Worth, Florida, because it was the nearest branch. Different departments worldwide are easily identified by the company’s sign shown below.

What is the benefit of doing business with a franchise?

One of the benefits of doing business with a franchise is easier management. Rich (2007) argues that franchisees run their businesses, thus reducing the management demand placed on the business owner or franchiser. The second benefit is the ability to develop a brand quickly. The more franchisees a business owner has, the more chances of increased brand awareness. The brand also benefits from the franchisee’s capital investment. The third benefit is improved cost management (Webber, 2012). Every franchisee finances its franchises, and the franchisee meets all costs and receives income while offering royalties and franchise fees or mark-ups on the products sold in the franchises. Another benefit is getting more ideas for the future because franchisees can contribute ideas based on changes in the business environment and customer needs and preferences.

Conclusion

The business environment is becoming more dynamic as people develop new business ideas. This has resulted in the rise of different types of businesses taking advantage of business opportunities and raising capital to implement various business ideas. Some of the common types of businesses are small businesses and franchises. The main difference between a franchise and a small business is that in a small business, the business owner can sell a wide range of products from different brands, but only one type of brand is sold in a franchise. Individuals who do not have money to start small businesses can consider running a franchise because a franchise does not require startup costs. Investors may also consider setting up franchises to increase brand awareness, lessen management responsibilities and explore different business opportunities.

References

Fleury, J., Hartzheim, B. H., & Mamber, S. (2019). Introduction: The franchise era. The Franchise Era, 1-28. https://doi.org/10.3366/edinburgh/9781474419222.003.0001

Khan, M. A. (2014). Restaurant franchising: Concepts, regulations and practices (3rd ed.). CRC Press.

Mariotti, S., & Glackin, C. (2014). Entrepreneurship and small business management. Pearson Higher Ed.

Pyasi, V. (2010). ‘Franchises system – A new business model’ analysis of legal issues relating to franchises. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1698487

Rich, J. R. (2007). The unofficial guide to opening a franchise. John Wiley & Sons.

Webber, R. (2012). An introduction to franchising. Macmillan International Higher Education.

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Last week, you described a local small business you frequent. Now, I want you to think about a franchise you visit. Before starting this assignment, Please do the following:

Franchise vs Small Business

1. Review the definition of a franchise: an agreement whereby an independent businessperson is given exclusive rights to sell a specified good or service (found in your textbook, Part Two, How to Plan and Organize a Business).
2. Go to the franchise website, franchise.org, found in the weblinks for week two, and search for a franchise in your area that you have been to at least once. This search function is under “Own a Franchise,” then “Find A Franchise.”
3. If you cannot locate a franchise with a physical location, look for one that operates over the Internet and explore the site.

Name the franchise you chose to study and use this franchise; answer the following questions:

1. How does your experience with a franchise you visited compare to your experience with a small business?
2. When you do business with a franchise, how does your experience differ from what you described last week when discussing a small business?
3. Why did you visit this business over another one like it?
4. What do the employees wear? What is the location? What does the sign look like?
5. What is the benefit of doing business with a franchise?

Your final assignment should consist of three sections:

An introductory paragraph that describes the franchise you chose to study.
Answers to each of the questions are given here.
A closing paragraph that summarizes your findings.

Small Business Management: An Entrepreneur’s Guidebook
Mary Jane Byrd Chapters 5-7

http://www.franchise.org/
http://www.sba.gov/