Buying a Franchise vs. Starting a Business: Which Is Better?

Finally leaving the role of an employee and setting out to become an employer, having your own business, is such a major life decision. If you’ve finally decided you’ll have two paths to choose from – starting up from scratch or buying into a franchise. Both paths have their own pros and cons, and in the end, it all depends on what you want from your business and how you want to run it. We’re going to try and provide enough information on both choices so that we’ll hopefully ease your decision on what kind of business you’d like to run.

Franchise: Pros and Cons

To start, let’s talk about the most obvious benefits of starting your business by buying into a franchise. First of all, you receive immediate brand recognition you would have to fight for if you started your business from zero. You’re buying a name, a certain reputation, and you’ll have to align yourself with the core values and principles on which that franchise is built. This can be good or bad, depending on how much you agree with their philosophy, so doing your research on that part is a must, you want both sides to be proud of the business.

By investing in a franchise, you also get the rights to use their well-established systems with a proven great track record. In most cases, you’ll also get regular corporate support and extensive training for you and your employees. Think of all these perks as shortcuts to success, and keep in mind that this is what makes running a franchise much less time-consuming than starting your own brand-new business.

The thing about franchises is – they are expensive to buy into, and also come with ongoing expenses like mandates or buying supplies at inflated prices. Some franchises are more likely to fail than others, so you have to look into their reputation. If you don’t choose carefully, you may get only a 60% chance to succeed. Some of the best 25 franchises to own offer even better chances of success. This may not sound like a bad percentage, but thinking how much money and effort you’ll invest, it’s better to try and find a better success ratio, considering there are businesses that are said to offer almost a 99% success ratio.

Startup: Pros and Cons

The foremost thing that will draw you towards choosing this path in starting your own business is that you will be the man in charge in every possible way. Unlike with the franchise business, you will make your own rules and regulations, set your own values and principles and steer the course of the business 100% yourself. The cost of starting your very own business from scratch is significantly lower than buying into a franchise, you can begin with as little as 10.000$, which is nothing compared to the prices of franchises which can go from 500.000$ to a million and more. If you’ve got a great idea and the skills to set it in motion, you can be looking at an amazing profit here. The risk is greater since you literally start from zero, but if you do it right, it may pay off immensely greater than the franchise deal.

There are of course negative sides to doing it on your own. As we said, the risk is greater, and much of the course of your business’s development is unknown. How well will your product sell, will the customers like it, how long until you break even and start earning money instead of just turning the initial investment in circles? The chances may not appear to be on your side, as research shows that as much as 20% of businesses fail in the first year. Don’t let that bring you down, though, you can work on beating the chances, just don’t expect it to be easy.

You’ll probably need to work long and hard hours and have your mindset on the goal at all times, and not waver under any difficulties that will almost surely arise. If you’re not sure you’ll want to dedicate an immense amount of time to make your idea succeed, maybe the franchise option is more suitable for you.

The risk is always there, there are no certainties in the world of business. But as Del Boy from Only Fools and Horses says, “he who dares, wins”, so you’ll have to be bold in order to succeed on your own. It may be a turning point in your life, but try not to think of it as a once-in-a-lifetime thing. If it doesn’t succeed the way you thought it would, you can always try again, and if not, at least it’s a learning experience.