Franchise or own business - which is better?
When you start thinking about that sweet business idea, your first instinct is probably to ask yourself: franchise or own business? The choice may seem obvious.
Franchising is a well-documented and proven route to entrepreneurship. It can be an excellent way to enter the business world with a proven business model that has been tested by others and is supported by an established company.
Franchising usually involves the use of another company's trademarks and business methods for profit, usually as a condition of licensing their brand and selling your products or services under that name.
There are advantages and disadvantages to both owning your own business and becoming a franchisee, but there are many things to consider when deciding which option is best for you.
Why franchising?
Franchising is a business model that is designed to give people access to proven business concepts. With many different sectors represented under one model, franchising allows for a wide variety of businesses. Franchises are attractive because they offer an established business model and a pre-existing brand.
The business model is often the most important aspect when it comes to success, and franchising allows you to leverage a pre-existing system that may already have a strong presence in the industry.
This can be a particularly attractive option if you do not have much experience in the field you want to enter, as you can avoid many of the common pitfalls associated with starting your own business.
Why own your own business?
While franchising has its advantages, owning your own business can also be very rewarding. Owning your own business has many advantages, such as having control over your own destiny and the ability to pursue new ideas and opportunities without having to ask permission from a franchisor.
Owning your own business can also be very lucrative, as it allows you to keep most of the profits generated by your business. Franchises often charge a percentage of revenue and require you to contribute to advertising and other aspects of the business that you can avoid when you own your own shop.
Owning your own business also gives you the opportunity to build something that can be passed down from generation to generation. While franchising is a good way to start a business, you may want to own your own business so that you can build it the way you want to.
Advantages of franchising
A business model tested and perfected by others: Buying a franchise means taking advantage of a business model that has been tried and tested and perfected by others. Since franchises have often been in business for several years, you can benefit from the data and research already done by the franchisor.
More time and money to focus on what he does best: By not having to start the business from scratch, you can focus on what you do best while outsourcing much of the other work that is usually required when setting up your own company.
Esto puede ahorrarle una cantidad significativa de dinero y darle el tiempo que necesita para centrarse realmente en los aspectos principales de su negocio.
Potential for long-term success: Franchises have a high long-term success rate because the franchisor has invested a lot of time and money in the success of the model.
As a franchisee, you benefit from the franchisor's efforts to ensure your success.
This means that you can expect a lower risk of failure than if you try to start your own business.
Assistance in finding and securing premises: One of the most important parts of setting up your own business is finding and securing a suitable location.
In many franchises, the franchisor will help you find the right location and negotiate with landlords on your behalf.
Help to advertise your business: Franchises often provide you with access to a large advertising budget, which you can use to promote your product or service.
This can be especially useful when you are starting out and trying to get your name out there.
Access to established vendors and suppliers: One of the biggest challenges facing a new business owner is finding reliable vendors and suppliers.
Franchises have already established relationships with many of these vendors and suppliers, which can save you a significant amount of time and money.
Cons of franchising
- There is no room for creativity: A major disadvantage of franchising is that you have less control over your business model. You have to operate within the strict confines of the franchise model set by the franchisor. This can make it difficult for you to be creative and try new things.
Capital requirements: If franchised, an initial payment will have to be made to the franchisor. This amount can vary greatly depending on the franchise model. Franchising also usually requires a significant initial investment, as you will have to pay for the rights to operate the franchise and make the necessary changes to the business model.
Lower profitability: When you franchise, you usually have to pay the franchisor a percentage of the profits. This means that, although you may make money from the franchise, it may not be as much as you would make if you owned the business.
Increased regulation: When you franchise, you become part of a larger company. This means you have to comply with rules set by governing bodies and other franchisees. This can be especially difficult for new franchisees who are unfamiliar with industry regulations.
Advantages of owning your own business
Full control over the business model: When you own your own business, you are in control. This means that you can decide what products and services you offer, set the prices of your products and services, and hire who you want to work for you.
Full control over profits: When you own your own business, you keep almost all of the profits your business generates. You are not obliged to pay a percentage of your profits to a franchisor, which can make a big difference to your bottom line.
Ability to put your own ideas into practice: When you own your own business, you can implement the ideas you want to see in the industry. You can create your own product or service and overhaul the entire business model. This is a great way to really make your mark on the world.
Build something that will last: One of the biggest advantages of owning your own business is that you can shape it any way you want. You can decide what your business will look like, how it will operate and how it will treat customers and employees.
All these aspects can be built with the aim of making your business last for decades.
Cons of owning your own business
Many up-front costs: When you have your own business, you have to pay for everything in advance. This means that you have to save a significant amount of money before you can open the doors of the business.
As you have to pay for everything yourself, it may take longer to get your business up and running than if you franchise it.
Risk of failure: When you own your own business, there is a very real possibility of failure. Your product or service may not be what customers want and you may be forced to close your doors.
You also need to be concerned about competition, changes in the economy and other factors that may affect your business.
Lack of financial security: Although owning your own business can be a great way to earn a significant amount of money, there is no guarantee that you will be successful.
You can put in a lot of time and effort and still fail, so be prepared to accept the risk that comes with entrepreneurship.
There is no advertising support: Owning your own business means that you are responsible for building your customer base.
You will not have access to a large advertising budget, so you will have to rely on word of mouth and your own marketing efforts to get customers.
Council
We have come to the end of our comparison between franchising and owning your own business. Before deciding which way to go, you should consider your level of experience, the sector you want to be in and how much money you have available to invest.
With so many advantages and disadvantages to both franchising and owning your own business, the choice is basically up to you.