What Does It Mean for a Restaurant To Be Franchised?

Restaurants fall into three broad categories: independents, chains and franchises.

A restaurant becomes a franchise when its owners decide to license their branding and operational model to other entrepreneurs, who open, own and manage their own restaurants with the brand.

McDonald’s is perhaps the most well-known example of a franchised restaurant. Most McDonald’s are owned not by the McDonald’s corporation, but by entrepreneurs — or, franchisees — who handle the day-to-day operation of their stores while the larger corporation — or, franchisor — provides operational guidance, marketing support, vendor contracts and other resources. 

When a restaurant is franchised, it means the business model has proven sturdy enough to succeed on its own, without the hands-on guidance of its original founders or owners. McDonald’s has established a brand name, reputation and processes of service that make it profitable to own and easier to launch than an entirely new brand, which is worth a lot of money to investors. 

Difference Between Chains, Franchises and Independents

Chipotle, on the other hand, is a chain restaurant, meaning every single Chipotle location is owned by the Chipotle Mexican Grill corporation. Consumers likely don’t notice the difference between chain and franchise restaurants, as both McDonald’s and Chipotle stores have a unified look and similar offerings across locations. 

Unlike chains, franchised restaurants have greater flexibility in how they staff their stores and engage with their communities. Usually, a franchised business is owned by a local entrepreneur with ties to their geographic location. It’s much more likely that a franchised restaurant would support a local softball team, for example, than a large corporation.