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The franchisee pays the franchisor for the business opportunity and agrees to operate the business according to the franchisor's directions. The franchisor owns all the trademarks, business methods, and supplies that it allows others to use under its contract. The difference between a franchisor's and corporation's operating a chain of stores is that the chain store has store managers who are company employees, whereas the franchise operation is owned and managed by self-employed business people.
A franchise chain is usually operated by a network of independently owned franchise owners, although some franchise chains, like McDonalds, penetrate markets with both franchised and company-owned restaurants. This is called dual distribution.
A company-owned chain is a network comprised of locations that are all owned by a single entity. All retail Starbucks locations in the U.S., for example, are owned by Starbucks - except for some in airports and bookstores that may be "licensed."
There is an article on the Franchise Foundations website discussing this difference.
Kevin B. Murphy, B.S., M.B.A., J.D.
Example of the franchise = McDonald's where individual operators own the sites but operate under the McD name.
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