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Concession Agreement Vs Franchise

As businesses grow, they often look for opportunities to expand their reach. Two common ways to do this are through concession agreements and franchises. While these terms are often used interchangeably, they have distinct differences. In this article, we’ll explore the differences between concession agreements and franchises and what that means for businesses.

Concession Agreements

A concession agreement is a contractual arrangement between the owner of a property or location and a business. In this agreement, the business is granted the right to operate in that location in exchange for a percentage of their revenue or a fixed fee. The owner retains control over the property and the terms of the agreement, while the business operates and manages the location.

Concession agreements are commonly used in locations like airports, sports stadiums, and amusement parks. In these cases, the owners of the locations want to offer a variety of services to their customers but don’t want to operate those services themselves. The businesses that enter into concession agreements benefit from having access to a large customer base in a high-traffic area without having to invest in the property themselves.

Franchises

A franchise is a business model where a franchisor grants a franchisee the right to use their brand and operating system in exchange for a fee. The franchisor provides the franchisee with support, training, and ongoing assistance. In a franchise, the franchisee operates their own business under the franchisor’s brand and must follow their operating system.

Franchises are popular in industries such as fast food, hospitality, and retail. In a franchise, the franchisee benefits from operating under an established brand with a proven operating system. The franchisor benefits from expanding their brand’s reach without having to invest in the individual locations.

The Key Differences

The key difference between concession agreements and franchises is the level of control the owners retain. In a concession agreement, the owner retains control over the property and the terms of the agreement. The business operating in the location must follow the rules set out in the agreement, but they maintain control over their own operations.

In a franchise, the franchisor retains control over the brand and operating system. The franchisee must operate the business according to the franchisor’s rules, which can include everything from the products they sell to the uniforms their staff wear.

Another difference is the level of investment required. In a concession agreement, the business doesn’t need to invest in the property or location. They simply pay a fee for the right to operate there. In a franchise, the franchisee typically must invest in a location and the equipment necessary to operate the business.

Conclusion

Concession agreements and franchises are both useful ways for businesses to expand their reach. However, they are different in their level of control and investment required. Businesses should consider their goals and resources when deciding between a concession agreement and a franchise. By understanding the differences between these two business models, businesses can choose the option that is best for them.