Direct Operation or Franchise Stores

                                        

Chain stores are fashionable in these years. Direct chain stores are easily to obtain wealth while franchise chain stores win brand effects. Which chain store modes are better? Direct or franchise ones? And are there any standards for selecting? 

Now we will talk about the three standards. 


1. The main link between headquarters and chain stores

There are mainly two kinds of links, product and service. 

For chain system with products as its main link, franchise chain stores are better. It is because such chain system can provide standardized products easily and ensure their quality. As to those with services as link, the mode of direct chain stores would be favorable, because service quality is hard to guarantee. 

The root reason why direct operation is better for service-oriented enterprises is that service means benefits for headquarters and chain stores. It is not easy for franchisees to generate profits for franchisers in a long term. In this case, direct operation is more likely to strengthen its control and financial management than franchise operation. 


2. The dependence for franchisees towards headquarters

For franchisees highly depend on the chain systems from the headquarters, franchisers shall consider to expand their markets through franchising. However, if franchisees are not so rely upon that, direct chain stores are also good choice. 

3. The risk capacity for owning chain stores

As we all know, owners take part of the risks for their stores. Direct stores obtain benefits directly but as a result, they shall also at their own risks for operation affairs. For franchise chain stores, there are lots of advantages. Franchisees have the rights of using brand, products and also customer resources from franchisers.  


Here we can draw a conclusion as follows:

The expansion for the whole chain system is in fact the output of the comprehensive strength from the headquarters. It all depends on the management team, capital, technology and market positions of the headquarters. Direct operation is very similar to clone the capacities from its headquarters while franchise store operation is just like make join efforts with the headquarters. Chain enterprises with the above two modes are the most promising ones in the future.