Are Franchises Considered "Small Businesses"?

Independent franchises share a similar structure with independent small businesses but with some unique provisions. For example, both franchises and small businesses share a comparable staff size and consumer market.

Both have the ability to hire local employees and are able to be involved in their communities, and both can attract customers in a similar grassroots manner. But what truly separates a franchise from a small business is that they are backed by a corporate team.

That doesn’t mean a franchise is not a ‘small business’ operation; it means the franchise has a preset road map and brand recognition, and incoming franchisees don’t have to reinvent the wheel.

There are a few other key differences between independent franchises and non-franchised small businesses. A franchise may be unable to alter its product or change its service due to its corporate ties, whereas an independent small business can take more liberties without adhering to a franchise framework. This means that franchises might have diminished freedom when it comes to decision making, but this can actually be a good thing in certain cases. Rather than having to oversee big-picture changes, a franchise owner can adhere to a proven business model while retaining their small business characteristics.

Independent, non-franchised businesses are also forced to establish their own marketing campaign, while a corporate-affiliated franchise is able to rely on large-scale marketing that is paid for through franchising fees.

Franchises have a team of corporate employees in place to ensure its business follows a proven system. Royalties are issued to that corporate team, and franchising fees are paid unlike an independent business model, but the guidance that comes with those payments can replace the guesswork or unknowns of navigating a consumer market independently. 

When a collective franchise establishes itself as a nationwide brand, it can be easy to blur the line between nationwide brand and local ownership. This is where confusion can arise and where some may not identify a franchise as a small business.

Corporate affiliation does not mean a single franchise isn't a small business: It just means they are part of a team of other small businesses, too.