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Franchise vs. Startup: Why Franchises Can Be The Better Option

Starting your own small business can be exciting. It can help you pave the way for success and create the life you want for yourself. However, it can also be intimidating for those who are starting anew with little experience, or making the jump from employee to employer. One of the first questions you must ask yourself as an aspiring entrepreneur is what type of business you want to get into. Do you want to start over from scratch as a start-up, or do you want to get into a franchise system? To decide on what you want, it’s important to evaluate carefully all the pros and cons of launching of a start-up and a franchise. Below are the most important factors you will have to consider before making this decision:

Capital

Starting any sort of business is a financial risk. Yet, by fully understanding the amount of capital and ongoing liquidity needed and being aware of how it can be obtained and sustained, you can increase the likelihood of success. Lack of funding, especially early on in the life cycle, will be a business killer.

As start-ups entail building the business from scratch, the business owner will inevitably face more uncertainty with laying out budgets and targeting liquidity levels. The experience of the owner will weigh heavily on the accuracy of those targets. If you are not an expert, you may need to seek advice. That in itself could be an additional cost.

Franchise buyers, on the other hand, will be provided detailed guidelines on what actual franchisees in the system are paying for to effectively run their business. Some costs may are considered “best practice” while others will be required. These may be found in the FDD, Items 5 thru 9. Obviously, the goal is to provide transparency and assistance in creating a business plan and building out a pro forma.

Brand Recognition

Franchises have a substantial advantage over start-ups when it comes to brand recognition. This is due to the fact that most franchises have spent a tremendous amount of time and money strengthening their product or service and hence established their brand. Quality and consistency are paramount to a franchise brand.

Start-ups, however, have to spend significant time to build a presence. Owners need to possess the right marketing skills (or bring in experts) to acquire recognition for their brand. This leads to a longer, slower ramp up.

Past Experience

The success of any business depends primarily on the owners’ knowledge. It is integral for any person wanting to own a start-up to have a sufficient knowledge of business basics and then be able to implement this knowledge to everyday business decisions.

Franchises on the other hand, tend to have much more detailed systems and processes already in motion, hence making it possible for the amateurs or the relatively less experiences to leap in without a steep learning curve.

Conclusion

Franchises provide an option to for you to buy into existing, successful and running business model. The franchise comes with a successful training program and expert support when it comes to the technicalities and the training programs. Franchises have an impressive success rate, and the chance of failure is not as high as you would be made to think. If you consider yourself to be detail-oriented and are sufficiently good at following directions, and are looking to avoid the hassle and unnecessary risk in starting up from square one – franchising might just be a quick and easy way for you to become a successful business owner.

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