What is the difference between a franchise and a dealer?

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pmiranda2857 eNotes educator| Certified Educator

A franchise, like Mcdonald's, is owned and operated by an individual who is licensed, by the franchiser, to operate a McDonald's food store. Under the terms of the license, the owner, the franchisee must undergo training from McDonald's so as to insure that the product will be consistent with all the other McDonald's in existence. 

The menu must be the same, the product delivery and price must be the same.  The franchise owner is bound by a strict business plan that requires following corporate rules and policies.  There must be continuity in all McDonalds, as they represent a corporation.

A dealer, like a car dealer, has a license to sell a certain brand of car, they must represent this brand, like, Ford, but the owner, operator has much more freedom and flexibility in how he runs the business.  The price is not dictated by the corporation, nor is the inventory.  Although there are rules and policies that must be consistent with Ford, the dealer has the ability to run the business more as an individual owner than does the franchise owner. 

While the franchise owner must rely on volume for profits to increase, it is really the only way to improve the bottom line, the dealer can be more creative with pricing to increase the profitability of the business.

One McDonald's cannot run a special with hamburgers for 99 cents while the others don't.  But one Ford dealer can undercut another Ford dealer's price to get the sale. 

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