Franchise or Own Business?
Let's begin with the following question:
Do you know the difference between owning a franchise and having your own business?
There are many people aiming to be their own boss, having their own rules, and doing things their own way. But there are different ways of doing this, so in this article, I will make a brief explanation of the similarities and differences having a franchise and owning a business have. Before taking it to the next level, I believe it is necessary to understand, or have a clear idea of the two business models, what kind of roles a franchisee has and which ones does a business owner has.
Some of you may be thinking:
"There's no difference, either way, I get to be my own boss, which in the end is what I want! - I want to do things my way!"
While it is true that you get to be your own boss as a business owner or as a franchisee, there are major differences between both options that you should take into account before making any decision.
When you buy a franchise, you automatically enter into a system that has already been established and proven to be a success. I have heard many people say that if you want to be your own boss, buying a franchise is the easiest way because all the paperwork, numbers, administration, legal and boring excel things are done, all we have to do is follow instructions and keep the fire going. Easy peasy!
Below I will list some of the great benefits most franchises will provide you with:
Ongoing guidance - They will be with you during all the process and check-out on you after!
Operational assistance - Everything solved! If you need anything just ask for it.
No experience needed You don't necessarily have to have business experience to run a franchise. As stated before, you will be accompanied and guided through every process
Training programs (for yourself and your employees). Because the business is already running, most of the companies give training so people can learn the way things are done, and in every shop things are done in the exact same way.
Success rate - Franchises have a better rate of success than a start-up business
Operational assistance - As easy as this "They do the numbers"
Easier to secure finance for a franchise - It may cost less to buy a franchise than to start from scratch
In other words, the key benefit of buying a franchise is that you have almost all of the business strategy and planning done, some people may say that the "hard work" and the strategic thinking is done, and fortunately, all you have to do is get the thing started and once you do, keep going!
Unfortunately, life is not that easy, even if they give you a business model which has the "key points" already figured out, and all you have to do is follow certain instructions or guidelines, you do not have everything figured out, is not over yet. I like to think of it as a recipe, the franchiser gives it to you (the recipe), but it is on you to see if you are able to bake the cake and make it as tasty and puffy as the one the franchisor made. The tough part is, that other people have already tried the cake, so they are already expecting the same flavor, size, ingredients, calories... everything, they are waiting to have the exact same slice they tried previously.
Really, having a franchise is not as easy as it seems, it is not a go button that you push and things start to happen while you are sitting on the couch.
Below I list some disadvantages being a franchise presents:
Agreement with the franchisor - Entering into a formal agreement with a franchisor is not always a good idea, it depends on the relationship you have with him/her.
Little room for creativity - As everything is already established, you don't have to be creative about it
Pressure - You have to follow the brand in the exact way the franchisor told you to
Due to the fact that is not your idea, there are usually restrictions on where to operate, the products you sell, and the suppliers you use.
Reputation - Bad performances by other franchisers may affect your franchise's reputation
No renewable - Franchisors do not always have to renew an agreement at the end of the franchise term
Franchising is seen by many as a simple way to go into business for the first time. But keep in mind that franchising is no guarantee of success, and the same principles of good management such as decision making, time management, (among others) still apply.
This is starting from scratch, putting everything that is in your head to paper, then turning it into numbers, and so on. When starting your own business you only rely on yourself for absolutely everything. From the business planning to the design. You make a decision about every single aspect of your business, you are 100% free.
Benefits:
Fewer upfront costs: You decide how much money will you invest this month, you go at your own pace, which makes you adapt and be flexible.
Greater costs in the long run: This refers to the minimum cost of production.
Innovation and creativity: It is your idea, your time to shine, you have to open your mind and think about everything to make your project happen
Professional freedom and growth: You are as flexible as you want to be (with limits of course) and, because in the beginning, you do not have much income to have a lot of personnel, you are able to learn about every (or almost every) department.
Some people say starting a business is much bolder, there is much more risk but much more freedom; everything relies on you, from bottom to the top, you may only rely on yourself.
Higher risk of failure: the main problem is that small business have a much higher risk of failure.
Low compensation: In the beginning, you invest much more than you have, you put everything you have into your project.
Lack of resources: When I say start from scratch I really mean from scratch. You need to start looking for investors, co-founders, etc, to help you have all the resources you need for your business to succeed
Lack of processes: In the beginning is all about growing and doing it fast, a start-up is very we'll worry about that later kind of environment
A lot amount of stress: Imagine this, few people, working more than 8 hours per day, with not a lot of money or resources, wanting to grow as fast as they can, and looking for people that believe in them so they can borrow money from them. Easy for no more than 8 people right?
Buying a franchise is having always a backup, knowing it its really hard for you to fail, you expect continued support and assistance in every aspect of your business. You have the security you need, you do things your way, but you always depend on others, you have to keep in mind it is not likely for things that you do not agree on the change.
Conclusion: Main difference between operating a franchise and having an independent business:
Flexibility/support
A small independent business has a higher risk of failure
A franchise will have a detailed marketing strategy and a bigger buying power.
A startup will give you more innovation and creativity
In my opinion, there is no right or wrong, I will not tell you what to do or which option is best, because that evaluation is on you. You will always encounter "What else can go wrong?" and "This was the best decision I could've ever done!" days. Everything depends, there are many factors you should take into account such as the risk you are willing to take if you are looking for a short-term or long-term project, the income you have. It is a hard decision, you need to have very clear what is exactly that you're looking for.