Is Franchise a Local Business

This is a good question that merits the understanding of certain terminology and ownership of the responsibilities that come with the franchise. In this particular column we are going to discuss the franchise/franchisee operation from the restaurant perspective.

First, a franchise is a business model where a franchisor grants a franchisee the right to operate a business under the franchisor's brand name and business model. A franchisee is an individual or company who purchases these rights from a franchisor. Essentially, the franchise is the business model itself, while the franchisee is the person or entity who operates it. 

When we see a franchise or what we would naturally label a “brand” restaurant in this case, we come to often to an immediate conclusion that the restaurant is not a local business and is a corporate establishment.

Well, the truth can be found in a mixture of it all. Let us try to break this down.

When a restaurant is a brand or national/regional name, and the restaurant is owned and operated completely by the corporate entity that owns the brand/name; this would fall under what is commonly referred to as a corporate store. Does this still classify as a local business? To a degree yes, they are made up of local individuals that may be on the management team, but the

restaurants are staffed and operated by locals.

Therefore, there is that local impact this corporate restaurant has upon the local economy.

When an individual or local person, for our understanding, looks to get into the restaurant business, they will either start their own brand and style or invest in a corporate brand by becoming a Sole Proprietorship. This means that they have purchased the right to open, and operate, a brand-name restaurant, and will assume full operational and financial responsibilities for that unit.

Keep in mind that when a franchise or brand is purchased by a local operator, that local operator must pay back to the franchise or brand, franchise fees and in some cases a percentage of gross income from the restaurant. There are significant financial responsibilities that the owner of the restaurant must meet to satisfy the corporation.

Nevertheless, when a local person purchases a franchise or brand restaurant and opens that store here in Bryant they are just as much local business as any other. Now, do they benefit from national advertising and the nationwide supply chain with provides buying power for products? Yes, they do, what do you think those franchise fees and other payments back to corporate go

towards?

Shifting gears to what is the more popular version of independent locally owned restaurants.

These are individuals that have a dream and a vision and go out to secure the capital necessary to fund the entire purchase and operation of their restaurant. From the capital to purchase or rent a building and equip that building with the necessary items to cook and serve. All the way top putting up the capital to hire a workforce so the doors can be opened.

These are indeed a special breed of entrepreneurs. They are daring and fearless and should be

respected just as equally as the franchise owner, but with a bit more reverence.

These independent owners do not share the resources that franchise owners share. They must

secure their own food and materials prices and do so through many of the same companies that

the franchise has available to them, just not the buying power of multiple stores.

This ambitious restaurant owner is purchasing items on their own as a single store or in some

perhaps a second location, if they are indeed that daring to have a second restaurant!

So, what can we conclude? Corporations that own restaurant franchises are less than twenty

percent owned and operated directly by the corporation. The vast majority of what we see in our

communities are purchased by individuals and they pay for the franchise rights to operate that restaurant.

The management team and the employees are local folks thus making this very much a local business.

When a restaurant is opened by an individual and is not a corporate franchise, these types of stores and indeed a stop or two further down the road as an independent, locally owned restaurant and deserve just as much of your patronage as the brand stores. With that said, keep in mind that the independent restaurant does not necessarily have the buying power and the advertising advantages that the corporate stores do.

Corporate or independent, they both hire local people to manage and run the restaurant, and the money spent at each does support the local economy and the sales tax generated is put to use right here in Bryant.

The local sales tax perhaps, is the only tax that we can see working for the community daily. Police, Fire, EMS, animal services, parks, street department, and many other aspects. But this is a conversation for another column.

Shop and eat local, no matter what the name on the sign says. Staying local matters!