The Battle of the Brands: Understanding the Differences Between Chain Restaurants vs. Franchise Restaurants

16 - 02 - 2024
Daniel Chin

Explore the differences between chain and franchise restaurants: ownership, risk, creativity, and support. Understand how franchises like Juici Patties offer independence within an established brand, providing a solid foundation for success.

Key Points

  • 🏢 Ownership and Control: Chain restaurants are owned and directly managed by a parent company, ensuring consistent quality and control, while franchises are operated by independent owners who manage one or several locations.
  • 💵 Investment Costs: Both models require substantial investment, but franchisees have variable investment levels and ongoing fees like royalties, unlike chain restaurants that bear all operational costs.
  • 📉 Risk Management: Chain restaurants’ parent company assumes all operational risks, affecting overall performance, whereas franchisees primarily handle risks, with some support from the franchisor.
  • 🎨 Creative License: Chain restaurants offer consistent customer experiences across all locations, with no room for deviation by individual managers, unlike franchises which may allow some local customization.
  • 🛠️ Support and Training: Franchises provide extensive initial training and ongoing support, helping new owners integrate into the system, which is less common in chain operations.
  • 🚀 Benefits of Franchising: Franchises benefit from an established brand, reduced business failure risk, and possible mentoring from experienced owners.
  • 📊 Chain Restaurant Advantages: Chains benefit from efficient, large-scale marketing and volume discounts from suppliers, potentially lower menu prices, and the ability to test new concepts in select locations without widespread impact.

Although both chain restaurants and franchises may share the same industry and provide the same services, they have several differences that make them unique. Not only are their operating models different, but they also have a number of differing characteristics including the financial aspects of owning one, such as the investment costs and the support and training provided. Let’s take a closer look.

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Operating Models: Chain Restaurant vs. Franchise

The main difference between the operating models is that with a chain restaurant, all of the business locations are owned by one individual parent company. Whereas with a franchise, individual stores are operated by independent owners. Furthermore, the chain restaurant owner handles the management of the entirety of the whole company, this includes retaining quality control of each restaurant within the chain.

In the case of the franchise restaurant, however, there is no single proprietor who is actively involved with each individual restaurant. Although, in some cases, it is possible for a franchise owner to purchase multiple franchises in different locations, typically, owners manage just one location.

Investment Costs in Chain Restaurant vs. Franchise

In both cases, a considerable financial investment is required. The difference with a franchise is that buyers have the freedom to choose how much they wish to invest. They will also have to pay one-time franchise fees at the beginning of their franchise ownership and then a fixed percentage of royalty to the franchisor.

Owners of both a chain restaurant and a franchise will still have to meet the necessary overhead costs such as equipment, materials, and inventory. In many cases, franchise owners get assistance from the franchisor with marketing, which reduces their overheads somewhat.

Business Risk: Chain Restaurants vs. Franchise Restaurants

There is always some degree of risk to owning a business. Several things can result in a loss of ROI, for example, human error, damage to inventory, and inadequate marketing strategies. With a chain restaurant, the parent company is responsible for all the risk. What this means is that if a particular location is not performing as well as expected, it affects the company’s performance overall.

With a franchise restaurant, the risk is shared between the franchisor and the franchise owner. However, although the franchisor invests a percentage of money and resources to get the franchise off the ground, most of the operational business risks are the responsibility of the franchise owner.

Creative License: Chain Restaurants vs. Franchise Restaurants

Because a chain restaurant owner has full control over every location, the brand offers the same dining environment, almost identical menu items, and consistent customer service throughout each restaurant. There is no leeway for chain restaurant owners to make independent choices outside of the restaurant brand model.

Franchises often allow a little more creative license. This may be in the form of varying products, such as menu items, or services, such as home delivery. In some cases, it may even involve the way the franchise owner markets the restaurant towards a certain demographic within their community. Although most franchisors try to maintain consistency across the restaurant locations, in general, there is less control from the franchisor.

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Benefits of a Franchise Restaurant

Franchises offer the following benefits to franchisees:

  • Established business model: Because a franchisee has purchased a franchise license, they are permitted to operate under an established business model, so franchisees don’t have the responsibility of creating their own system of operations.
  • Brand identity: Entrepreneurs start out with a well-known brand that has earned customer loyalty. This means the franchisee does not have to build their business from the ground up. This reduces the risk of business failure and increases the chance of a good ROI.
  • Training and support: Most franchisors provide their franchisees with initial training and ongoing support. This helps to educate new business owners on business and revenue management strategies. Some franchisors also offer mentoring programs that allow new franchisees to turn to established franchise owners for advice and assistance.

Benefits of a Chain Restaurant

The benefits of operating a chain restaurant include:

  • Efficient marketing: With a chain restaurant, consumers expect the same dining environment, menu, and special offers from every location. This allows the parent company to devise a unified advertising campaign, making marketing and advertising very streamlined.
  • Volume pricing: Suppliers of chain restaurants typically take advantage of volume pricing. This means that inventory suppliers offer discounts based on the amount of goods purchased. Owners of chain restaurants are able to do this because of the large volumes of inventory they buy and sell, allowing menu price points to be lower than for a franchise.
  • Test locations: It’s common practice for chain restaurants to use one or two locations as test areas where they can experiment with new menu items, changes to the restaurant layout, or advertising strategies. Such experimentation can often lead to valuable information about the profitability of making changes without affecting the whole company.

If a franchise restaurant business is something you are interested in, you might want to find out more about joining the Juici Patties family. Contact us today for more information.

Meet the Founder and CEO of Juici Patties Franchise in the United States, Daniel Chin. As the son of Jukie Chin, he inherited a legacy of mouthwatering patties. Recognizing the brand’s potential, Daniel joined the business in 2013 and is now the driving force behind Juici Patties’ success in the U.S. With a strong commitment to quality and exceptional customer care, Daniel aims to expand our presence while staying true to our core values.

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