Opening a Start-up vs. Buying a Franchise
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If you’re reading this, you are deciding how to become an entrepreneur, specifically become a franchisee. During your research, you will likely weigh your options on whether to start an independent start-up business or a franchise.
Choosing between the two options can be a daunting decision, and very dependent upon your individual circumstances. So, let’s look at the benefits and challenges that come with opening a start-up vs. buying a franchise.
If you have a marketable idea, you could start your business from the ground up. Many entrepreneurs love the idea of being the one in control through the whole process.
Whether you ease into your solo business development or jump in with both feet, there are many pluses. For instance, you are completely in control of your timeline. You could also choose to introduce your unique idea slowly while still holding another job. In addition, you can make choices to keep startup costs as low as you would like. The benefits are all yours too, which is very attractive.
On the other hand, the downside of starting your own business includes substantial risk. Only 55% of start-ups are still around after five years. To make yours successful, you accept that the onus is on you alone, and your fortunes will be won or lost based on assumptions, grit, and some good (or bad) luck.
However, many potential customers will appreciate a small operation and support your enterprise. Still, you will be starting from scratch to build a brand, revenue, and enough consistency to provide reliable income. If you are not suited to that level of risk, a franchise would be a better option for you.
A franchise is not the perfect answer for every entrepreneur, though. If your preferred working style is solo, you might not like the pre-set operation that a franchise requires. You won’t have the control to change products or methods, and that limitation can squash your creativity.
Plus, the cost of buying into a franchise can be prohibitive. There are low-cost franchises, but you must have operating funds and the ability to pay ongoing franchise fees while paying for personal needs.
Regardless, the most obvious negative to buying a franchise is the lack of independence. Franchisors control nearly all aspects of the new business, even though you would be the one responsible for daily operations.
As a bonus, franchise success rates are significantly higher than a start-up. On average, 92% of franchises are still in business after five years per some studies. A new entrepreneur who chooses to buy a franchise has the benefit of a proven business model. Nothing is guaranteed, but franchisors offer well-designed marketing programs, brand recognition, established supply chains, training, and support to ensure your success. The franchisor’s vested interest in your success creates a knowledgeable partner who will guide your business plans.
There are pros and cons to both start-ups and franchises. The most important factors will be your personal preferences about operating, i.e., alone or with a franchisor. If you feel compelled to strike out on your own, franchises will not feel like a good match. However, a larger franchisor can be a wise choice for those willing to be part of someone else’s success and idea.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.