Franchising has been a popular business model for many retailers, allowing them to rapidly expand their presence and capture greater market shares.
Since Best Buy has over 1,100 stores worldwide and is a successful electronics retailer, you may be wondering if Best Buy is a franchise? Here is what I’ve found out about this!
Is Best Buy A Franchise In 2021?
Best Buy is not a franchise company but a corporation as of 2021. All Best Buy stores are owned and operated by the parent company located in Richfield, Minnesota. The company currently runs operations domestically in the US and internationally in Mexico and Canada, with over 1,100 stores in total.
If you want to learn more about why Best Buy is not a franchise, who owns the Best Buy corporation, and how does Best Buy operates, keep on reading!
Why Is Best Buy Not A Franchise?
Best Buy is not a franchise because it runs and operates as a corporation.
Previously operating as an audio specialty store under the name Sound of Music, Best Buy was rebranded into Best Buy Co. Inc. in 1983 and since then began operating as a corporation.
Franchise companies allow entrepreneurs and investors to open a store using their brand name, business operations, and processes.
However, this mode of business has several drawbacks which Best Buy wants to avoid. Here is a list of the disadvantages of following a franchise model for the business:
- Best Buy has already established a long-standing brand name that generates more profits than a franchising agreement would generate
- Best Buy might experience difficulties controlling the operations and activities of the franchisee, which may harm the brand image
- A franchisee not living up to quality standards (such as poor customer service and cleanliness) may have a negative reputational effect on Best Buy
- Best Buy may opt for Mergers and Acquisitions which guarantee faster growth than entering into a franchising agreement
For these reasons, Best Buy has decided to operate as a corporation instead of as a franchise business.
Who Owns Best Buy?
Best Buy is a public company, which means that it has a variety of shareholders (or stockholders) who own a small portion of ‘shares’ and vote on significant corporate actions.
Here are the top 3 shareholders of Best Buy along with the stake they hold in the company:
- The Vanguard Group, Inc. (11.10% stake)
- BlackRock Fund Advisors (5.59% stake)
- Fidelity Management and Research Corporation (4.65% stake)
Note that shareholders do not have the right to dictate and direct daily operations at Best Buy Inc., which are run by the executive team.
As a corporation, Best Buy adheres to the requirements of corporations by holding regular meetings of shareholders in which they elect directors of the company.
How Does Best Buy Operate As A Corporation?
As a corporation, Best Buy runs as a legal entity that is separate and distinct from its founder and owner, Richard M. Schulze.
Even though the company runs as a corporation, it enjoys the rights and responsibilities of an individual person.
For instance, the company can loan and borrow money, enter contracts, sue and be sued, own assets, pay taxes and hire employees.
However, note that Best Buy Inc. runs business activities by virtue of the stockholders’ decisions and appointed directors.
The shareholders of Best Buy Inc. own a percentage of the company and have to pay for their shares to Best Buy’s treasury upon issuance.
After that, the shareholders can appoint a board of directors who will appoint management personnel and oversee important corporate decisions.
Best Buy operates as a corporation and not as a franchise, with a long list of shareholders who vote to appoint a board of directors who appoint management and make important decisions.
The reason to operate as a corporation is due to the already strong brand image of Best Buy.