Target is one of the largest retail chains in the U.S. and sells a huge variety of items at both its store locations and online through Target.com.
With 1900+ stores nationwide and an established brand image, Target is an ideal opportunity for local business owners looking to run franchises. But is Target a franchise business? Here is what I’ve found through my research!
Is Target A Franchise?
Target is not a franchise business. Instead, Target is run by the Target Corporation and classified as a general merchandise retailer with 1,900+ stores across the U.S. It was originally called the Dayton Company, before being renamed as Dayton-Hudson and finally Target Corporation in 2000.
If you want to learn more about the differences between franchises and corporations, why some businesses franchise, and why Target does not do so, keep on reading!
Why Doesn’t Target Franchise?
Corporations like Target may choose not to franchise for several reasons. Primarily though, it is because they already have enough capital from their existing business and do not need any further expansion that franchising can offer them.
Moreover, they may not wish to work with other business partners (franchisees) or risk any liability from them.
Another reason could be that Target does not want to risk its brand at the hands of people other than its own direct employees.
Since Target cares a lot about its brand presence and store quality, it would be a big risk for the company to allow new franchisees to potentially ruin this.
Additionally, since Target stores cost millions to build and maintain, the franchisee startup fee is typically far outside the budget of a Subway or McDonald’s franchise.
How To Get Involved In Target
While Target does not franchise any of its stores to the public, it does, however, allow anyone to buy its stock which is publically traded on the S&P 500 Index.
So if you are passionate about the Target brand and would like to get involved in a different way, then investing in the Target corporation could be the next best thing!
What Is The Difference Between A Franchise And A Corporation?
Corporations and franchises have entirely different business models. Whereas a corporation is owned by shareholders and run by a board of directors, a franchise is owned partly by the franchising company and the franchisee who must pay a fee in order to use the company’s assets to do business.
Other than that, a franchise earns its money through franchising fees and profit, and creates locally owned businesses with a focus on relationships.
However, it is also entirely liable for the conduct of its franchisee, whereas a corporation has limited liability throughout its shareholders.
Why Do Companies Franchise?
For small businesses, franchising is a great way to expand and earn profit early on without having to spend too much time, effort, and money.
By signing with franchisees, the business can leave recruitment to the third-party owner. The franchisee will be invested in the long-term as well so there’s less concern over managers who may move on quickly to other roles.
Additionally, the business can have more room to grow while the franchisees are running locations across the country.
It can instead focus on handling local marketing and improving brand recognition by basing its model on relationships with local customers rather than big brand choices.
What Is A Franchise?
A franchise is a business model where individual stores and restaurants are owned by local people and operated locally.
The business will distribute products and services to a franchisee, who will then pay royalty fees (and sometimes an initial fee) for the right to do business under the company name.
Franchising can be great for big chains as this can let them build more stores locally through the franchise fee, and individual owners don’t have to worry about marketing as much since the company would handle most of it.
Some examples of companies that franchise are McDonald’s, Starbucks, and 7-Eleven.
What Is A Corporation?
A corporation is a legal entity that is separate and distinct from its owners. These can be treated as an individual in legal terms, and enjoy the rights and responsibilities that an individual possesses.
Moreover, a corporation is owned by its shareholders (who it pays dividends to), run by its board of directors, and funded by investments and/or profits.
Notable examples of corporations include Target, Walmart, and Amazon.
Conclusion: Is Target A Franchise?
Target is not a franchise and is instead a corporation owned by the Target Corporation that has headquarters based in Minneapolis where the first Target discount store was started in 1962. Reasons for why it is not a franchise include Target not needing the extra capital from the royalty fees that franchising would bring in, or simply not wanting to work with outside business partners.