Are Franchise Opportunities Really Less Risky Than Business Startups?

By Marshall Reddy

So you’ve decided to become your own boss…now what? There are two basic paths to business ownership that most people embark on. Choosing the right path is not so much a matter of risk as it is a matter of your personal best fit. Whether or not you decide to explore franchise opportunities or start a business from scratch, your decision will be influenced by what makes the most sense for you. There is no one-size-fits-all solution when it comes to business ownership.

Pros of Franchise Opportunities

Business owners choose to launch franchises for a variety of reasons. The most common reasons are because they feel a sense of security, it may be their first business venture, or they are huge fans of the franchise. And there are many other reasons that people choose to launch franchises. Here are some time-proven benefits of launching a franchise instead of starting a business on your own, from the ground up.

  • Franchise written on notebook with charts.More likely path to success. History has proven that having a large parent company for support can greatly increase your chances of success in small business. Franchise owners are more likely to succeed due to the training, ongoing company and industry education, and, usually years of proven success that have been established by the franchisor.
  • Marketing. Franchisors usually provide network-wide marketing, often through national marketing campaigns, that can significantly enhance your overall brand awareness beginning the day you launch your business.
  • Supplies and inventory. Franchise networks can greatly increase your buying power. Through collective buying power across their entire supply chain, franchisors can often offer the best prices on products for your business.
  • Financial Assistance. Some franchisors offer loans and other financial tools to help new franchisees get off the ground.
  • Access. Franchises have access to most, if not all, of the intellectual capital and resources that the franchisor has developed. This makes it easy for new franchises to hit the ground running.

Cons of Franchise Opportunities

There are several reasons why business owners, especially those with deeply rooted entrepreneurial spirits, choose to forgo the franchise route and start businesses from scratch. Below are a few reasons why people often choose to not purchase franchises.

  • Costs. Initial franchise startup fees can often be higher than what it would cost to start a business from scratch. Many franchisors pull together fees from their franchises for national or regional marketing efforts, which can become expensive and difficult for individual franchises to track ROI. Plus, many franchises charge royalties each month, which reduces the overall profit that you’ll be able to keep.
  • Less flexibility to innovate. Your franchisor, the company that you purchase a franchise from, may be overly authoritative or may not always want you to conduct your business in the way that you wish to do so. From designated vendors to specific ways to market a product, certain rules that are designed to help you grow may cause headaches from time to time.
  • Dependency. As a franchisee, your strategies and successes as a business owner are not the only variables that influence your profit potential. If your franchisor drops the ball in any way, you will likely face negative outcomes as a result.

Pros of Business Startups

For the right people, starting a business from scratch can be the best fit. Here are some of the reasons why you may wish to consider starting a business from the ground up instead of purchasing a franchise.

  • Freedom. As the owner of a small business that you start from the ground up, you’ll have the final say in everything. Plus, you’ll have complete control over your supply chain, which will give your more opportunities to find the best deals with the right vendors.
  • Maneuverability. Unlike with franchises, you’ll have no limitations, other than those that you impose upon yourself. Your success will truly be yours because you will have the opportunity to craft a business strategy that works for you, exactly how you want it to be.
  • Entrepreneurial spirit. There are few things more rewarding than building your dream business from idea to execution and more.

Cons of Business Startups

  • Risk. Most business startups fail due to lack of support. If you start your own business from scratch, you will be solely responsible for learning or developing systems that work and can grow your business. If you fail to figure out solutions or make the right decisions, your business and your success are on the line.
  • Loneliness. Franchises often present many opportunities to connect with peers and resources that you will not have if you start your own business. As a business owner, you’ll feel the joys of success and the immense pressures of doing things that have never been done before. You’ll have to find ways to stay motivated even when challenging times come…and they will come.
  • Resources. You will be solely responsible for finding or creating the best ways to get inexpensive inventory, developing processes that work for your business, and crafting effective marketing strategies. You don’t have to do everything on your own, but you do need to know who or what will be able to provide the right solutions when you need them.

marshall reddyFor more information about owning a franchise or to learn which specific franchises are on the market near you, contact me or visit my blog.