Starting a franchise or starting your own business can both seem like daunting prospects when you first consider them. However, they each have their own set of pros and cons that can help inform your decision on whether to go with one over the other. Here are some of the most important pros and cons to keep in mind when choosing whether to start a franchise or startup business, as well as some things to consider that aren’t covered here.
Startups
Startups mean that they’re relatively untested as a business concept, though this also means you have the opportunity to become something truly groundbreaking and innovative. Startups are often run by less experienced founders, which can result in a bumpy ride for both the founders and early employees at the company. As long as you’ve got what it takes to be an entrepreneur, you can take on one heck of an exciting adventure with your startup — but it’s not without risks!
Pros of startups
- The startups can mold the company into one’s own image. It not only provides an immense sense of pride but also freedom from standardization.
- The risk involved in starting up a business as opposed to buying a franchise makes it easier for entrepreneurs to handle any financial difficulties they may encounter while building their company.
- Startups can also be more lucrative than franchised businesses because the entire profit goes directly back into the business (instead of going to franchisers) and all decisions are made by the owner.
Cons of startups
- They require large amounts of startup capital, and upfront costs for office space, and hiring experienced employees can be expensive as well. If you don’t know what you’re doing (and it shows), then any investment will evaporate.
- The risk also becomes much higher when starting your own business as you will be heavily invested in the company’s success or failure. It is possible that you could lose everything if the company fails which is always an unfortunate situation for everyone involved.
- You do not have an established customer base. You’re going to have to do more marketing and advertising than you would at a franchise because there are no customers already waiting for your product or service when you open up shop.
Franchise
A franchise offers the stability of an established business model, as it is a proven concept that typically starts as an established chain or individual store franchise before becoming available to franchises and location franchises through the investment of money and their know-how. Franchising can be safer since if the company is successful, then you know there is money in the reserve to keep your store open when times are tough– this might not always be the case with startups, depending on how they operate. You also don’t have to worry about inventing something new for yourself: all the research has been done for you already.
Pros of Franchise
- A franchise is often the best option for people who don’t have business experience but still want to be their own boss, or for those who just want to work part-time and enjoy many benefits like income security, financial assistance, training, uniforms, and more.
- Franchises offer support that startups typically don’t in a business structure with proven methods and processes to reduce risks.
- Additionally, franchises offer much-needed help at key points in time throughout the lifecycle of your business. One example would be when you’re ready to expand into new markets – franchises offer expertise on how to grow internationally. Another would be when you’re considering buying a second location – they can help you decide if it’s worth it financially, as well as provide insight on all the legal paperwork needed to make sure you can do so without any hassle.
- There are plenty of other pros to starting a franchise too, including free consultation and access to regional experts from anywhere in the world.
Cons of Franchise
- Starting up a franchise can be less risky than starting your own business, but you may miss out on opportunities to create something new, see success at an earlier stage in life, or contribute to your community by following the values you share with fellow business owners.
- It’s difficult to leave a franchise without repercussions, as it’s not always easy to find another franchisor that offers products or services for your industry.
- The profit margins are typically lower for franchises because they have already been tested, making them more appealing to investors but less desirable for entrepreneurs looking for high-risk-high-reward scenarios.
- Franchising usually requires an initial investment, which may not be within reach for some small business owners. However, there are also lots of opportunities for someone with some money to invest in themselves; this would allow them greater control over the company (as long as they don’t get greedy).
Conclusion
If after reading this post you’re wondering whether or not you might want to start your own business one day…or buy a franchise today–we hope this information helps guide your decisions. Chances are when you want the security of that’s what we do around here culture or don’t have the funds to start your own business you should opt for purchasing a franchise instead of founding your own company, but if risk-taking is what gets you going on Monday morning then so be it!
Startups offer more creative freedom than franchises, and in general, you have more control over the day-to-day workings of your new venture. And while they are not without their risks, these benefits make starting a startup worth considering. But the decision is ultimately up to you–only you know what will give you peace of mind. If you’re still not sure which path to take, try asking yourself this question: Which type of work excites me? Remember to always follow your passion no matter what path you choose. The long-term goal of either type of enterprise is building wealth and independence, not running out at five o’clock every day.