Franchising And Chain Stores

Franchising, a practice adaptable to small business, has increased greatly in recent years. A common practice in the restaurant business, franchising combines the economic efficiencies of the large corporation with the benefits of local ownership. In this transaction, a large company allows an individual or small group of entrepreneurs to use its name (often a distinct advertising advantage) and sometimes its products in exchange for a percentage of the profits. The entrepreneur, who is usually not an employee of the parent company, is responsible for the management and operation of one or several units of the larger chain. The individual owner or owners must also assume most of the risks connected with the enterprise.

Franchising has costs as well as benefits for the economy. The rise of the chain store has inhibited the development of single proprietorships and partnerships. Chain stores use mass methods -- buying in large quantities, selling a high volume and stressing self-service -- that make it possible to sell goods at lower prices than small-owner stores. Chain supermarkets, for example, using lower prices to attract customers, have driven out many independent small grocers.

Nonetheless, many independents do survive. Some individual proprietors join forces with others to form chains of independents or cooperatives. They pool their buying power or become independent franchises, and they often serve specialized or "niche" markets.