Difference Between a Franchise & a Corporation

by Heather Frances Google
A franchise restaurant may be owned by a corporation.

A franchise restaurant may be owned by a corporation.

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Many chain restaurants, hotels and retail stores are owned as franchises, meaning the parent company provides permission for the local owner to use the parent company's name and products. A franchise can be owned as a corporation, sole proprietorship, limited liability company or other business structure.

Franchises

Under a franchise arrangement, a person or company purchases the ability to run a local business under a larger company's brand. Depending on the franchise arrangement, the local party may have to meet certain standards established by the larger company and purchase products from the larger company as well. For example, a local fast food restaurant is likely owned by a local or regional company and operated under a franchise arrangement with a nationwide or international franchisor that owns the rights to the features of the franchise, such as recipes, employee uniforms, advertising and operations manuals.

Corporations

Franchises can be owned by any type of business structure, including a corporation. A corporation offers liability protection for its owners, called shareholders. Corporations must register with their state's business registration office and file annual reports. They must also hold periodic shareholder meetings and keep certain records as required by state law. Franchises can also be owned by other business structures, however, including a limited liability company. LLCs also offer liability protection, but generally require less paperwork.