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Are Franchises Considered Small Businesses?

Are franchises considered small businesses? The answer depends on your particular circumstances. In many cases, they are. The Small Business Administration maintains a database of registered small businesses. A typical type of franchise is product/trade name franchising. A franchisee purchases goods from the franchisor and then sells them as their own. In other cases, a franchisee may sell certain types of cars but operate independently.

The primary difference between a franchise and a small business is that a franchisee has less control over the business and more risk. A small business owner can make a number of mistakes, while a franchisee has fewer restrictions and less room for error. A franchisee is also required to pay a royalty fee to the franchisor. But a franchise usually has more profits and sales than a small business.

Final Thought

A franchisee is a sole proprietor and is responsible for all costs, including profit. A small business owner must also invest capital. However, franchisees have fewer startup costs than a sole proprietor. This makes them an ideal choice for a franchisee who is unable to invest the money necessary to launch a successful business. And the cost of starting a franchise is much less than that of starting a small business from scratch.

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