What is the difference between franchising and direct chain operation?

Chain franchising refers to the business system of the products and services developed by the leading enterprise (including trademarks, trade names and other corporate images, business technology, business locations and regions), which are granted by the leading enterprise in the form of a business contract to franchise stores within the specified area. or business rights. What is the difference between a franchise and a direct chain? Please follow the editor of Legal Savior Network to learn more below.

What is the difference between a franchise and a direct chain

1. The composition of property rights is different. Direct chain stores refer to highly organized retail enterprises that are owned by the same capital, centrally managed by the headquarters, and jointly carry out business activities. The same capital is the key to distinguishing direct-operated chain stores from other business forms, and it is also the essential difference between franchise operations and chain operations.

2. Different management models. The core of franchising is the transfer of franchise rights. The franchisor (headquarters) is the transferor and the franchisee (franchise store) is the recipient. The franchise system is in the form of a franchise contract signed between the franchisor and the franchisee. Each franchise store Personnel and financial relationships are independent and the franchisor has no right to interfere. The franchisee needs to pay the franchisor some form of remuneration for the franchise granted and the services provided. In direct-operated chain operations, the headquarters has ownership of each branch and has the right to decide on all specific matters in branch operation. The branch manager, as an employee of the headquarters, acts entirely according to the will of the headquarters. 3. The business fields involved are different. The scope of direct chain operations is generally limited to the commercial and service industries, while the scope of franchise operations is much broader and is also widely used in the manufacturing industry.

4. The legal relationships are different. In franchising, the relationship between the franchisor and the franchisee is the relationship between the parties to the contract. The rights and obligations of both parties are in the contract.There are clear provisions in the same terms. Direct-operated chains do not involve this kind of contract (the employment contract between the branch manager and the headquarters is a different matter), and the relationship between the headquarters and branches is adjusted by the company's internal management system.

5. Different development methods. Franchising expands the system by recruiting independent companies and individuals. The franchisor not only needs to attract potential franchisees, but also needs to select franchisees and provide training and services to franchisees. To expand the scale through direct operation chains, it is necessary to raise sufficient funds. funds and a large number of management personnel. In contrast, franchising uses other people's assets to expand market share and requires less capital, while the development of direct-operated chains is more susceptible to capital and personnel constraints.

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