Difference between Dealer & Franchisee

In short the difference between dealership and franchising lies on the following:-

1. Shared profits instead of royalty payments
2. Standardised training methods for employees
3. Building and maintaining facility in the manner specified by franchisor.
4. Strict rules of operation
5. Regular inspection of facility and operation by franchisor
6. Prices fixed by franchisor

Other legal issues to be looked into while drafting a franchisee agreement are defining the territory, right of franchisee to appoint sub-franchisees, clauses of confidentiality, grant of licence of trademark, know how etc, payment of royalty and services charges by the franchisee to the franchiser, etc, etc.  There are no much legal differences other than what is stated above. 

Thanks for the prompt reply.  I have seen both, Dealership and Franchisee Agreements covering all the above points...... so, my doubt remains unresolved.  It will be nice if you could give some examples of differences or may be share draft agreements if you have a copy thereof.

Franchisee generally receive training, marketing and other support on a continual and ongoing basis while a dealer may not be provided or is incidental to the relationship

Franchisees usually offer only the products or services authorized by the franchisor while  a dealer may handle a variety of different products or services.

A franchise, like Mcdonald's, is owned and operated by an individual who is licensed, by the franchiser, to operate a McDonald's food store. Under the terms of the license, the owner, the franchisee must undergo training from McDonald's so as to insure that the product will be consistent with all the other McDonald's in existence. The menu must be the same, the product delivery and price must be the same.  The franchise owner is bound by a strict business plan that requires following corporate rules and policies.  There must be continuity in all McDonalds, as they represent a corporation.

A dealer, like a car dealer, has a license to sell a certain brand of car, they must represent this brand, like, Ford, but the owner, operator has much more freedom and flexibility in how he runs the business.  The price is not dictated by the corporation, nor is the inventory.  Although there are rules and policies that must be consistent with Ford, the dealer has the ability to run the business more as an individual owner than does the franchise owner. 

While the franchise owner must rely on volume for profits to increase, it is really the only way to improve the bottom line, the dealer can be more creative with pricing to increase the profitability of the business.

One McDonald's cannot run a special with burgers for 99 cents while the others don't.  But one Ford dealer can undercut another Ford dealer's price to get the sale. 

Thank you Mr. Sachin and Mr. Krishna.

naveen ji,

i m also agree with sachin's view.