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03 Jun 2015
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Start-up vs. Franchise: Which is Right for You?

Becoming a small business owner is exciting.  It's a time filled with the freedom to make your own choices and create the life you want. But it can also be intimidating for many who make the leap from employee to employer, filled with lots of major decisions.  One of the first of those decision is determining what type of business you want to own.



Do you want to start a business from scratch, or do you want to  join a franchise system?

 

To make that decision, it's important to evaluation the pros and cons associated with both.  A few of the major factors to consider are: 

 

1.  Ownership Model

A start-up owner must be comfortable being the sole decision maker for their business.  They have to determine what they will sell, the best way to market their products or services, how many employees the business needs, etc.  In other words, an independent business owner must rely on his/her own business savvy to make educated guesses.

 

A franchisee doesn't have the same freedom to change their products or services, but they are able to rely upon a proven business model that the franchisor has developed and found to be the most successful.  While franchising sacrifices some of the independent start-up owners experience, the security and stability that come with franchising are sometimes more beneficial for entrepreneurs who are better suited to follow a system.

 

2.  Cost

Since they are building a business from the ground up, an independent business owner will likely need to invest more money to get the business going.  However, they also have more control over investment options and business plans in general so it's easier to delay the opening date or downsize the project until capital needs are met.

 

Franchise buyers may have lower upfront investment amounts, but they are required to meet the franchisor's requirements. That means it's not easy to postpone opening dates or adjust the scope of the project.  In addition, franchisees are required to pay ongoing royalties to the franchisor.

 

3.  Brand Recognition

Franchises have the advantage over independent businesses when it comes to brand recognition.  For start-ups it will take time to build brand awareness.  But buyers also need to understand that brand recognition can have a dark side.  If the franchisor or other franchisee does something that results in negative publicity for the brand all of the franchisees can suffer.

 

4.  Past Experience

Because the success of independent businesses relies so heavily on the owners' knowledge, it's important for any entrepreneur wanting to own a start-up to have a deep understanding of business basics and apply that knowledge to everyday decisions.

 

Franchises, on the other hand, have detailed systems and processes already in place, it makes it easier for first-time owners to jump in without the steep learning curve.

 

Are you struggling with the decision of what type of business to buy?  Give us a call at (281) 488-2022.  One of our Business Consultants would be happy to discuss these and other considerations with you.

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