Difference between a Franchise Dealership and an Independent Dealership?

November 27, 2019

They are two main forms of conducting business in the market. Their working patterns are different and but share the same goals in order to earn profits.

What is a franchise and Independent Dealerships?

Franchise dealerships deal in trade-ins of used cars from anyone but in the new car segment, they cannot sell other brand’s cars. They act as authorized dealers of the brand and they can deal with all the brand’s business. It has the involvement of numerous documents in order to acquire the franchise.

Independent dealerships do not undergo the hassle of agreements or contracts from any auto manufacturer. They majorly deal in the buying and selling of used cars and run their business with their own dealership name which does not include any brand in it.

Let’s have a look at how they are different from each other before you indulge with them and perform business activities.

● Operations or Business Activities

The major area of concern is how they operate their business. Independent dealerships are running by an independent entrepreneur and franchise dealership have proper involvement of the franchisee.

Franchise dealership comes with the set rules and regulation which you cannot abide them at any cost. Franchise dealerships are lesser preferred by people almost entrepreneurs are drawn towards the independent ones as they can run business in the way which they like.

Business Activities

● Paying Royalty amount

The people who acquire the franchise has to pay royalty fees to parent companies. This is a permanent fee that they have to on a monthly basis. Independent dealerships do not have to deal with these kinds of fees which provides them retained earnings.

● Investment required

Franchise setup requires a huge amount of money and the person involved has to pay different types of fees such as franchise fees, licenses fees, etc. and he has to also go through the process of recruitment too in order to hire a salesperson. There are a number of expenses that are involved in the franchise dealership in comparison to independent dealers. The costs which are borne by the independent dealers are related to the license and buying of products.

● Targeted Sales

Franchise dealers are bound by the parent company and they have set targets by the company which they have to fulfill. In any case, if they are not able to achieve the business chances are the company can terminate your business in the long run.

Independent dealership is not involved with the targeted sales as they work according to their wish and run their business accordingly.