Branch: definition and overview


What is a branch?

A branch is a place, other than the main office, where business is conducted. Most branches consist of smaller divisions of different aspects of the business, such as human resources, marketing, and accounting. A branch will generally have a branch manager who will report directly and report to a member of management in the main office.

How a branch works

Branches are useful because they allow many of the customer-specific administrative considerations to be carried out closer to the customers. For example, Starbucks has branches to better serve the district managers of its retail stores in a more cost-effective manner. They can also serve and be more informed about the needs of specific locations, deploying location-specific items or adjusting personnel.

Key takeaways

  • A branch is a useful way for large companies to meet customer needs for face-to-face interaction.
  • A branch can be made up of a single person or can be staffed, depending on the needs of the company.
  • In densely populated urban centers, it is not uncommon to see several branches close to each other.
  • In more rural areas, it may make sense to operate fewer branches that are further away.

There is no universal model that a branch configuration can adopt, but many are located based on geographic needs. Many customers may prefer a local representative that they can call quite easily, and in more populated urban centers, it is not uncommon to see many branches close together. This is most common when considering service-based entities such as chain restaurants, banks, and retailers. In rural areas with less dense populations, branches are likely to be more dispersed.

A branch can include a single representative or it can have multiple people depending on business needs. The term “pop-up” refers to the fact that the office or store has a very short duration. It may be there one week and disappear the next. Halloween costume stores are one example.

The “pop-up” store is a fairly common event for retail stores and other event-driven business opportunities. In the future, it is not unthinkable for financial service providers to use an emerging model to rapidly implement temporary branch locations to meet the needs of an on-demand market.

Example of a branch

Many retail investment firms use a hub and spoke method to serve their clients. The hub, or home office, serves the radios (branch offices) by performing many of the administrative functions that are optimal for scaling operations.

The head office of an investment firm will perform and make available to branches many services, including portfolio management, security analysis, branding, legal services, and a number of other services necessary to execute a transaction to big scale. For example, Edward Jones is an investment company known for its many branches – more than 15,000 in the United States and Canada. You have a large home office and branches are usually run by individual investment representatives.

www.investopedia.com

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Mark Holland

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