Corporations vs. Franchises

What’s the Difference Between a Corporation and a Franchise?

What You’ll Find In This Article

Have you ever thought about starting a new business? When visiting a local eatery, small business, retail stores like Starbucks or McDonalds, you may have wondered what it was like to own your own business. When successful companies take off, they often debate whether or not they want to grow franchisees and investors.  Franchises and corporations are two business models to consider. 

There is a good amount of risk and reward involved in growing your business, and it is essential to understand the necessary steps in doing so. Customers might not even notice the difference between the two because they have similar products and services. The management styles behind a corporation and a franchise are what differentiates the two business models. 

What is a Franchise? 

There are many franchise businesses you may notice in your day-to-day life. If you want to learn more about becoming an entrepreneur, it is necessary to know what a franchise or parent company is. 

A franchise means another company permits you to their name, logo, business, and overall brand. If you decide to open a franchise, you will most likely pay a fee to the company to build on their established entity. 

Some famous franchises include McDonalds, Subway,  Burger King, 7-Eleven, Dominos, Wendys, Taco Bell, etc. You enter a franchise agreement and relationship with your company’s other franchisees and business owners and have the same business name when opening a new franchise. To do this, you will have to pay a fee to access the franchise trade name. 

Typically as a franchise owner, you will operate under the franchiser’s guidance and must run your business seemingly identical to the way the other franchises are. Think of a Mcdonald’s, where the daily operations are similar. A benefit is that the franchisor does most of the marketing for you. Still, you should also be aware that owning a profitable location is not solely guaranteed by marketing. It takes management skills and training to run a successful franchise. Luckily the franchisor often provides on-the-job and classroom training to new franchisees. You should always research your franchise beforehand and read your franchise disclosure document (FDD) carefully. Any training the franchisor offers should be detailed on the franchise website and in the FDD report.

What is a Corporation?

A corporation is a structure in which one or more stockholders control the ownership. Incorporating is the best way to protect their assets, which is a large reason why people choose to incorporate in the first place. In a corporate business structure, you are expected to save money in taxes, have more flexibility with your business, and raise your capital more efficiently.  

On the flip side, by opening a franchise, you create a new company using the business structure, including a corporation, partnership, or limited liability company. You also have to pay a franchise fee. The corporation is in a separate legal entity; they are owned by shareholders and independent of their companies. Some famous examples of corporate-owned stores are Google, GM Motors, General Electric, JP Morgan, Microsoft, Apple, etc.

What are the Differences Between a Franchise and Corporation?

The main difference between a franchise and a corporation is that a third party owns the franchise itself. Shareholders own a corporation. Operations of both liability and the working model of each establishment are differentiated when running your business. There are a good amount of notable differences between franchises and corporations. 


Individuals own a franchise; however, a corporation is owned by shareholders. 


The franchise store itself controls a franchise; however, a corporation is controlled by the board of directors. 


In a franchise, you are liable for the actions of your business. Shareholders own corporations, so they have limited liability to their business. Franchises and corporations also operate differently. When you own a franchise, you are expected to pay a royalty to the franchise or use the brand name of success while corporations are engaged in the distribution and acquisition of shares and stocks. 


A franchise gets royalty payments for giving rights to the usage of trademarks. However, cooperation is dependent on the sale and purchase of shares and investments. 

Pros and Cons of Corporations vs. Franchises 

When making success in your business growth, you may question whether it is better to grow or franchise your company. Many different factors come into play when deciding if starting a franchise or a corporate owner’s growth is beneficial. One benefit of franchising is bringing your business to various locations across the country and globe. Another benefit to franchising is a majority of the duties have been left to the franchises and not the franchisees. You can also earn money through royalties and grow your business at a good pace. Some benefits to a corporation are that you’re an owner and control every aspect of the business as a whole. You also obtain all profits when doing so. You also will spend less time developing materials for your business. 


When entering the business world, there will always be risks and chances you take to become a successful business, so it is essential to do intensive research on the type of business structure you would like to obtain. The bottom line is, franchising and corporations are two of the many different types of business structures you should consider.

Everything You Need To Know On How To Start a Franchise

Thinking of becoming a franchisee? We’re here to help you through the steps of starting a franchise!

14 Questions to Ask When Buying a Franchise

Have you ever wondered what questions to ask a franchisor, what questions a franchisee might be asked?

How To Open A Franchise Restaurant

Before signing your franchise agreement, understand how the franchise model works and the pros and cons of franchise restaurants.

What Does a Franchise Broker Do?

Do you need some help finding the best franchise to invest in? Learn more about the benefits, costs, and risks of working with a franchise broker!

How Do Franchises Make Money

Before owning a franchise, it’s vital to understand how franchises make money, how much do franchise owners make, and learn from the most profitable franchises.

Top Entertainment Franchises That Are Growing

The entertainment franchise industry is in full swing as the world rebounds from COVID-19.

What is the Difference Between Franchisor vs. Franchisee?

What You’ll Find In This Article What is the Definition of Franchisee?What is the Definition of Franchisor?What is the Role …

11 Songs About Hotels

What You’ll Find In This Article What Are Some Songs about Hotels? Hotel California – The Eagles Heartbreak Hotel – Elvis Presley Holiday …

What are Franchise Royalty Fees?

Franchise fees include the initial franchise fee and the franchise royalty fee. These fees are typically paid monthly but sometimes are paid weekly.

What’s the Difference Between a Corporation and a Franchise?

The management styles behind a corporation and a franchise are what differentiates the two business models.

What is a Franchise Discovery Day?

What You’ll Find In This Article Can Anyone Attend a Franchise Discovery Day?How to Prepare for Discovery DayWhat Questions Should …

What is the Difference Between Franchising and a Partnership?

What You’ll Find In This Article What is the Definition of a Franchisee?What is the Definition of a Partnership?General PartnershipsLimited …

What is Franchise Insurance?

What You’ll Find In This Article How Does Franchise Insurance Work?Types of Franchise InsuranceProperty InsurancePublic Liability Insurance Product Liability Insurance General Liability …

What is a Franchise License?

What You’ll Find In This Article What is the Difference Between a Franchise and a License?State Licensing RegulationsWhat are the …

How to Become a Franchise Consultant

What You’ll Find In This Article What Does a Franchise Consultant Do?What are the Qualifications to be a Franchise Consultant?Steps …

What is the Difference Between Franchising and Company Owned?

What You’ll Find In This Article What is the Definition of Franchising?What is the Definition of a Company Owned Store?What …

What is an Area Representative?

What You’ll Find In This Article What is the Difference Between Area representatives and Master franchisors? How a Franchise Area Developer …

What is the Difference Between Franchising and Opening a Small Business?

What You’ll Find In This Article What is the Definition of a Franchise?What is the Definition of Small Business?What is …

How to Open a Gym Franchise

What You’ll Find In This Article What are the Benefits of Owning a Gym Franchise?Starting a Gym FranchiseHow Much Does …

COVID-19’s Effect on the Health and Beauty Industry

The health and beauty industry had a crucial role in protecting citizens during COVID-19. Find out how the coronavirus hit the health and beauty industry and how it bounced back!

How the Franchise Model Works

To enjoy the benefits of the franchise model, it’s essential to understand the different types of franchise models and how they work.

How to Evaluate Franchise Opportunities

Is this franchise opportunity right for you? We’ll explore the steps to evaluating a franchise opportunity, and how to decide between an established or emerging franchise.

How to Become a Franchise Owner

Investing in a franchise is a great way to start your own business. We will explore how to become a franchise owner and break down the paths to, risks, and benefits of owning your own franchise.

How to Reduce Your Carbon Footprint In Business

Running a business is one thing, but running an ecologically friendly business while staying profitable takes things to the next level. Here’s a short guide on how to reduce your carbon footprint in business.

The Differences Between a Chain and a Franchise

We break down the differences between a chain vs a franchise, so you can figure out which business is best for you.

How to Create a Franchise Business Plan

Understand why a franchise business plan can make or break your business and how to create a franchise business plan.

How Much Do Franchise Owners Make

Have you ever wondered how a franchise owner makes money? Is the risk worth the investment? Find out how franchisees get paid in our guide.

How to Get a Loan for a Franchise

To succeed at their new business, franchisees will need to have a steady cash flow and franchise financing options to ride the waves of the initial economic storm.

What’s the Difference Between a Franchise and a License?

While licensing is a broad term that encapsulates franchising, there are several licensing agreements available to prospective firms.

What You’ll Find In This Article