Franchising vs. Starting a Business: Which Is Right for You?
If you’re an aspiring entrepreneur, you have to carefully consider whether it’s really worth it to take the leap into business ownership. Chances are, you’re passionate about the industry you want to enter and believe you can make a difference. Weighing out the pros and cons of franchising vs. running your own business is your first step toward achieving that goal.
Understanding the Differences Between Buying a Franchise vs. Starting a Business
While franchising and starting a business share some similarities, they’re two totally different business arrangements. The main difference is in ownership — if you open a franchise, you buy into an existing concept. If you open your own business, you must make decisions about every aspect of that business.
Understanding the differences in how each business model operates can help you determine which one is the better fit for your goals and personality.
When you purchase a franchise, you gain the license and right to sell and market an existing company’s services or goods in a specific area. The franchisor, or the existing company, establishes the business model and trademark, which you buy into by paying an initial fee and royalty as the franchisee.
Business format: The franchisee essentially gains the right to operate a full business from the franchisor, who provides additional support such as operating manuals, site location services, training, business coaching and marketing resources.
Product distribution: While the franchisee receives the ability to sell products or services using the brand’s logo and trademark, they do not perform core business functions.
Manufacturing: The franchisee gains the right to manufacture and sell products that contain the franchisor’s intellectual property.
The type of franchise you’ll open depends largely on your industry — for example, a business format franchise makes the most sense for service-oriented businesses like in-home care and hotels.
The Pros and Cons of Franchising
Although it’s similar to running a small business in terms of commitment, franchising is a distinct entrepreneurial path. Some of the unique advantages of owning a franchise include:
More guidance: As a franchisee, you get support, expert coaching and resources from your franchisor that can help you keep your business on track.
Faster time to launch: Compared to a business you start entirely from scratch, purchasing and opening a franchise business may take significantly less time due to the additional support you receive.
Understanding of financial risk: Unlike an independent business where you may not know your upfront costs in advance, a franchisor discloses exactly what the cost of opening a business is.
Brand recognition: When you purchase a franchise, you buy into a company that already has an established reputation and customer base. This allows you to focus on retaining existing customers rather than attracting new ones, which boosts your chances of success.
Of course, there are also several things to consider about franchising:
Less creative control: Although franchising gives you access to an established brand, you have to follow your franchisor’s rules regarding how you operate. For example, you will need to use approved marketing and advertising materials instead of designing your own.
Higher startup costs: The average cost to open a franchise is typically upwards of $20,000, but it’s a worthy investment when you consider how many resources it gives you access to.
What Does Owning a Business Involve?
People who choose to own a business rather than open a franchise usually have a unique idea that fulfills a specific niche in the market.
Business ownership is significantly more intensive than franchising because you will need to consider additional challenges, such as your competitors. Entrepreneurs need to hustle and work long hours to get their businesses off the ground, and keeping themselves afloat often remains challenging until they reach massive success.
The Pros and Cons of Starting a Business
Starting your own business — or purchasing an existing one — has its own benefits and drawbacks. The advantages of owning your own business include:
Complete creative control: When you own a business, you have total control over everything from your marketing strategy to the products you sell and the tech systems you use.
Lower startup costs: The average initial investment to start a small business tends to be lower than typical franchise fees. However, it’s important to note that startup costs vary depending on factors like industry and business model.
The downsides to starting a business include:
Planning time: Depending on your industry and business model, planning and launching a new business may take anywhere from a few months to a few years.
No support: When you open your own business, you’re entirely on your own — and without a defined vision or the proper infrastructure to support your business, it becomes difficult to keep your business alive.
Lower success rate: Unfortunately, very few startups survive more than five years due to various reasons, including financial issues, loss of investor support and failure to capture the market.
Factors to Consider Before Buying a Franchise or Starting a Business
When you’re weighing out the question of starting your own business vs. buying a franchise, you’ll want to consider important factors like:
Support and infrastructure: What infrastructure do you have in place to support your business’ growth? Will you need additional assistance?
Mission and vision: What is the goal of your business? Do you have an innovative idea for a product or service, or are you more interested in getting your foot in the door of a specific industry?
Licenses and permits: What approvals do you need from your federal or local government to open your business? How long will it take to obtain those permits?
Initial investment:How much funding do you have available to put into a business or franchise? How much could you realistically get from lenders?
Terms and conditions: If you’re thinking about opening a franchise or buying an existing business, you’ve got to consider what’s included in your purchase. Learn as much as you can about the contract terms, including leases, training and inventory.
Finally, it’s important to take a good, hard look at yourself. What skills and experience do you already have in owning and operating a business? What kind of lifestyle do you want outside of business hours? Carefully consider the answers to these questions to determine which arrangement is the better fit for your personality.
HomeWell Care Services Can Help You Open a Franchise That Matters
Is being a franchise owner worth it? If you think starting a franchise business is for you, HomeWell Care Services can help you get started. Request your complimentary franchising kit to learn more about our opportunities, or contact us to speak with a team member.
