Legal Guide

Is Franchising a Good Fit for You? Here Are the Basic Things You Need to Consider

You’re probably reading this because you want to be your own boss and make more money than you could by working for someone else. You want to start a business, and a franchise might seem like a good idea because people have heard of the brand and a franchise gives you a blueprint of how to set up your business. On the other hand, you might be a creative person who wants to create something different from all the cookie-cutter franchises everywhere. Your dream might be to start your own unique product or sales platform.

Which should you choose? Ultimately, it depends on what you want out of being a business owner. Are you a visionary with a unique idea, or are you just in it for the money and the experience of managing a business? Here are some things for you to consider to help you decide.

Franchise pros and cons

Pro: brand awareness

A franchise business is a well-known brand and already has a customer base who will seek out your store. You will have much more initial sales volume with a franchise.

Pro: it’s easier

Starting up your own brand is a lot of work. If you buy a franchise, most of the hard work has already been done for you. The franchise does most of the harder things like marketing, testing, product development and so on. Your job as a franchise owner is basically the same as a manager who oversees day-to-day operations. The corporation takes care of everything else.

Pro: proven model

With a franchise, you don’t have to worry about finding the right location and how to drive traffic and increase profit margins. The franchise has spent years perfecting the business model. You don’t need a business law degree to handle any legal issues that might arise. All you have to do is follow the franchise’s blueprint for success. If you have the right management skills and talents, you will make money.

Pro: startup cost

A franchise tends to cost less than starting up a similar independent business. With an independent business, there are many startup expenses that you have to take care of yourself, but a franchise basically charges you a franchise fee and handles all the procedures of opening the business. Also, since franchises tend to have a higher success rate, a bank is more likely to approve your request for a small business loan.

Pro: experience for beginners

Maybe you don’t have the knowledge or savvy to build your own business, yet it's still a dream that you want to someday pursue. By collaborating with the corporation and following their procedures, you get to learn first-hand what it means to run a successful business, and you’ll have the knowledge you need when you’re ready to go on your own.

Con: you’re not completely your own boss.

You have to answer to the corporate headquarters and basically do whatever they say. If they want to paint your store purple, you have to abide by their wishes. If they decide to introduce a product that doesn’t align with your ethical principles, you would have to either acquiesce to this change or terminate your relationship with the company.

Con: no creative control

If you have a product idea or some vision of how you want to make your store sign and interior design unique and cool, forget it. The products and store layout are usually controlled by the franchise. Also, you can’t come up with your own marketing campaign or slogans. All the creativity is generally handled by the franchise.

Con: less control over your reputation

If another store or the corporation performs badly or does something unethical, your business is negatively impacted.

Con: sharing the profit

If you're running a franchise, you have to pay a portion of the profit to the corporation. This lowers your potential income. Pros and cons of starting an independent business

Pro: full control

As the founder and owner of a business, you have full control of all aspects of the business, including products, design, distribution channels and marketing.

Pro: flexibility

Did you choose the wrong location? You can move to a better one. Are your products too expensive or made of poor materials? You can make adjustments to appeal to your specific clientele.

Pro: clean slate

You get to create your own brand identity and control exactly how people perceive it over time. If you want to be green or non-GMO, you have the flexibility to make that happen. You get to shape your brand’s reputation and identity as you like.

Con: expensive

Starting a business comes with a wide variety of costs, and you will need to obtain all the capital yourself. You're also not as likely to obtain business loans with your own startup as you would with a franchise.

Con: more risk

Your own startup is not a proven model. You will have to do a lot of research to make sure there is a need for your products and that your location is ideal. When you hit bumps in the road, you’ll need to have more capital to sustain you through months of flat or negative sales.

How do you choose between franchise ownership or starting an independent business? No matter which way you decide to go, you need to have a passion for your product. As a business owner, you’ll likely be working 80 hours per week without making any profit for the first six to twelve months. Even if a franchise gives you some advantages, you might be more likely to succeed if you’re able to create your own business that you feel passionate about. Your decision ultimately hinges on what type of personality you have and where your talents and experience lie.

More to Read:

comments powered by Disqus