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Are Shops with the Same Sign Owned by the Same Company? How Franchise Contracts Work

Category: Technology

You see the same sign, the same uniform, and the same menu all over town. Yet, the people running these shops are often different from one store to the next. This is the hidden structure of a franchise agreement.

We will look at the difference between company-owned stores and franchises, how money moves between them, and the two main stories about how this system began. We also cover the rules for what must be explained before you sign a contract.

1. Why Shops with the Same Sign Can Have Different Owners

The Japan Franchise Association (JFA) explains that a franchise is a system where a headquarters (the franchisor) gives a franchisee the right to use its brand and business methods. In return, the member pays money and follows the headquarters' guidance while continuing the business [1]. The Japan Fair Trade Commission (JFTC) describes it similarly: the headquarters provides unified guidance and support, and the member pays for this service [2].

The most important point is that the headquarters and the franchise store are separate, independent businesses [1]. The JFTC also states that legally, they are independent operators [2]. This is different from a "directly operated store" (or regular chain), where the headquarters builds the store, hires the employees, and runs the shop itself [1]. So, even if two shops look identical, the staff in a franchise are not necessarily employees of the main company. However, this does not mean every shop is a franchise.

2. What Franchise Stores Borrow from Headquarters and What They Pay

Member stores pay money to the headquarters in two main ways. First, there is an initial "franchise fee." Second, there are ongoing payments called "royalties," which are the cost of using the headquarters' methods. The JFTC notes that the method of calculating royalties and the specific amount are items that the headquarters should inform potential members about in advance [2]. The amounts vary by contract and are not fixed for everyone. This article does not list specific rates.

What the member receives is not just the right to use the sign. It also includes guidance and support based on unified methods [2]. The fact that store appearances and product selections are consistent across many locations is a result of this standardization.

3. Was the First Franchise Singer Sewing Machines or a 1731 Contract?

It is often said that the world's first franchise was the sales network for Singer sewing machines, starting in the 1850s and 1860s. However, some experts call this a "myth." They argue that Singer did not have store management systems, training, standard manuals, or continuous royalties tied to using the business method at that time. They claim these were merely regional sales agents. Singer reportedly reduced its agency network and moved to company-owned branches in the 1860s [5].

The same critics point to an older example: a contract from 1731 between Benjamin Franklin and a printer named Whitmarsh. This agreement split income into three parts, with Whitmarsh taking two and Franklin taking one, for a term of six years [5]. This is just one viewpoint. The answer depends on how you define "franchise." This article does not decide which story is correct.

4. How Franchises Began in Japan Around 1963

Franchises in Japan are said to have begun around 1963 with companies like Duskin and Fujiya. In the 1970s, brands such as Mister Donut, KFC, and McDonald's expanded widely [6].

Seven-Eleven Japan was established in 1973 and opened its first store in Toyosu, Koto Ward, Tokyo, in May 1974 [7]. Reports and company histories say this first store was run by a local shop owner who had previously operated a liquor store [8]. This means a shop that originally sold alcohol started a new business with a new sign at the same location. We do not include individual names or personal details here.

This shows that franchising is not just for big corporations. It is also a way for local business owners to borrow a headquarters' system to start a new shop.

5. How Many Franchise Stores Japan Has: Over 250,000

According to a report on JFA statistics, the franchise market in fiscal year 2024 (April 2024 to March 2025) had 1,291 chains, 254,478 stores, and sales of 29 trillion 282.6 billion yen. Sales increased by 3.6% (1 trillion 29.7 billion yen) from the previous year, marking the fourth consecutive year of growth [4].

If you divide 254,478 stores by 1,291 chains, the average is about 200 stores per chain. However, this is just an average. The data does not show the difference in the number of stores between different chains. The fiscal year runs from April to the following March. The original JFA statistical tables were not accessible when this article was written, so these figures come through news reports.

6. Rules Requiring Headquarters to Explain Contracts Before Signing

The Small and Medium-sized Retail Business Promotion Act calls retail and restaurant franchises "specified chain businesses." The headquarters must provide a written document explaining the business overview and contract details to potential members before the contract is signed [3].

The JFTC's Franchise Guidelines were created in 2002 and revised on April 28, 2021. They apply to all industries. They list items that should be disclosed to potential members, including rules for suppliers, the content and cost of guidance, royalties, conditions for contract renewal or cancellation, and the possibility of opening another store of the same chain nearby (opening another store nearby) [2].

Also, soliciting members with sales predictions that lack a clear basis can be considered unfair customer inducement [2]. Judging whether individual contracts are good or bad is outside the scope of this article.

7. How to Compare Two Shops with the Same Sign Yourself

When you go out with your family or guardians, try comparing two shops with the same sign. Be careful to stay out of the way of pedestrians and only look from outside the store.

Beyond the sign's color and name, you might find similarities and differences in the building's shape, the entrance, or how notices are posted. Whether these differences come from headquarters' guidance or the individual store's own efforts cannot be seen just by looking.

If you want to read more, the Japan Franchise Association website has explanations of the franchise system and statistics [1].

Sources

  1. Japan Franchise Association, "What is a Franchise?" https://www.jfa-fc.or.jp/particle/78.html (Explains the definition, relationship between headquarters and members, and distinction from company-owned stores.)
  2. Japan Fair Trade Commission, "Guidelines for Franchise Systems under the Anti-Monopoly Act" https://www.jftc.go.jp/dk/guideline/unyoukijun/franchise.html (Covers the description of franchises, royalty disclosure, and pre-contract disclosure items.)
  3. Japan Franchise Association, "Laws Related to Franchise Business" https://www.jfa-fc.or.jp/particle/54.html (Details the written document and explanation obligations under the Small and Medium-sized Retail Business Promotion Act.)
  4. Nikkan Keizai Shimbun, "Report on JFA Statistics (2024 Franchise Market)" https://www.nikkankeizai.co.jp/publication/daily-news/backnumber/detail.php?id=4186 (Provides data on the number of chains, stores, and sales for fiscal year 2024. Secondary source.)
  5. The Franchise Consortium, "The myth that won't die: Isaac Singer and 1851" https://thefranchiseconsortium.com/article-the-myth-that-wont-die-isaac-singer-and-1851-celebrating-franchisings-founding-father-for-its-300th-birthday/ (Critiques the Singer sewing machine origin story and discusses the 1731 contract theory. One organization's view.)
  6. Franchise Research Association, "History of Franchise Business" https://fcken.com/fc-history/ (Describes the start of franchises in Japan around 1963 and their expansion in the 1970s.)
  7. Seven-Eleven Japan, 50th Anniversary Site "Dawn Period" https://www.sej.co.jp/50th/archive/reimeiki/ (Details the opening of the first Toyosu store in May 1974.)
  8. The Shashi, "Seven-Eleven Japan 1974" https://the-shashi.com/tse/3382/d/1974-1/ (Describes the owner of the first store as a former liquor store operator.)