Difference between Distributor and Franchise

Key difference: A distributor and a franchise are basically spreaders of products, differing in the way in which they spread. A distributor spreads the product by distributing, while a franchise spreads the product by expanding an organization in small firms.

In business, a distributor acts as an ‘an entity that buys non competing products or product lines, warehouses them, and resells them to retailers or directly to the end users or customers’. They are known to supply the range of services such as the product information, estimations, technical support, after-sales services and credits to the customers.

They provide strong manpower and cash support to the supplier or manufacturer's promotional efforts. They supply the goods directly to the stores or other businesses that sell to the consumers, and act as an intermediate between the producer and consumer. The distribution of products takes place through channels, which are interdependent organizations designed by firms with the help of proper path-orientation. They maintain an exclusive buying agreement, which limits their participants and enable them to cover a certain territory.

A franchise in business is ‘a privilege granted to market a good and/or service under a patented process or trademarked name’. These are allotted to an organization/company by the authorized government in order to expand business and market the product. They act as an expanded firm, which are nowadays available at many convenient places. Any individual can merge with the main organizations by law, in order to do business.

They are basically an authorization, which is granted by the government or company to an individual or group, enabling them to carry out specified commercial activities, such as providing a broadcasting service or acting as an agent for a company's products. These make the transactions easily available to the end-users. They act as a source to provide the employment in a larger ratio and also help in developing the market of the business in societies. Their working takes place in a chain format, representing the main authorization. Examples of franchisees are: fast food centers, bank franchisees, mobile galleries and many.

Comparison between Distributor and Franchise:

 

Distributor

Franchise

Who are they?

A company or person that distributes the manufactured goods to the retailers.

A business or service given to an authorization to operate.

What are they?

A distributor is any one individual, or group working under one person.

The franchise is a firm or small organization under one main authorized organization or company.

Link between

They act as a middleman between the manufacturer and retailers.

They act as a link between the main organization and the consumer.

Profit margin

The profit achieved is directly related with the individual (the distributor).

The profit earned here belongs to the main organizations.

Motive

The motive is to distribute the products.

The motive along with distribution is to elaborate and market the products.

Product types

The distributor supplies almost all varieties of goods and products.

The franchises are bound to market only one type of product and goods.

Employment source

The source of employment is less compared to the franchise.

The source of employment is more.

Image Courtesy: 500amonth.com, mediate.com.au:

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