When you want to get into business, one question you may be asking yourself is “do I buy a franchise or start my own business?” This is a good question for many, as there are pros and cons to both buying a franchise or starting your own business.
Let’s start by exploring what a franchise is and what an independent business is. A franchise is a type of business arrangement where the franchisee (you) is granted the rights to operate a business using an established brand name, business model, and a support system provided by the franchisor. In return the franchisee pays franchise fees which are typically annually and royalty fees which is typically a percentage of sales.
On the other hand, when you start your own business from nothing. You are relying on your own idea, branding, you choose your business model and so much more. You have full creative control and more flexibility building your own business, there are no licensing and royalty fees, but the risk can often be higher, but the reward is higher too.
Let’s take a look at the pros and cons of both buying into a franchise and starting your own business:
1. Buying into a franchise
Pros:
- there is an established brand recognition and customer base
- lower risk of failure compared to starting from nothing
- ongoing support and training for marketing and operations
- it’s a proven business model and has systems in place
Cons:
- it can cost a lot to invest in and there are ongoing fees
- you are dependent on the parent company
- there is limited creative control
2. Starting your own business
Pros:
- you have complete freedom and flexibility
- this is your opportunity to create your own brand
- you get personal satisfaction of building from the ground up
- potential for higher profit margins as there are no franchise fees and royalty payments
Cons:
- there is a greater risk of failure
- lack of external support for systems and resources
- need to build brand awareness from scratch
- requires significant sweat equity
These are just a few of the pros and cons, and you really need to consider what is the right fit for you. Think about your skills and experience. Do you have the experience to start from nothing or would you prefer to enter an existing business model?
You also need to consider your resources. Either way it costs a lot to start a business, but when starting a business from nothing you have the option to bootstrap. With a franchise, you need access to a large amount of capital.
Consider your risk tolerance as well. Are you comfortable with risk and starting independently, or do you prefer the lower risk of a franchise? What kind of business suites your personal vision and lifestyle? And does the franchise align with market needs?
The bottom line is that either way there are risks in whatever route you choose, so you must weigh your decision carefully. Think about your personality and what choice is better suited for you. Consider your short term and long-term goals, and how much money you are willing to invest. The truth is, nobody knows what’s best for you but you.