Start Your Own Business or Buy a Franchise: Which Is Right For You? Before you decide to jump into entrepreneurship — whatever that looks like for you — consider these six comparisons.
By David Busker Edited by Kara McIntyre
Key Takeaways
- Franchises offer a pre-established brand and operational blueprint, potentially providing faster profit and less initial time investment, but restrict autonomy in product and marketing control.
- Startups afford full creative control and customization, but require more time for development and may face greater initial financial and marketing challenges.
- Both business models come with their own unique sets of pros and cons concerning brand marketing, financial leverage, R&D, staffing, training and peer support, making the choice highly individual based on personal goals and preferences.
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If you are considering business ownership, then you've likely started weighing the pros and cons of transitioning away from a traditional corporate job and into an entrepreneurial role. But before you make any changes, it's important to understand your options. Let's consider two business ownership avenues: a startup business or franchise ownership.
Below, find a list of six comparisons to weigh before making a decision.
Related: 6 Signs That Franchising Is Right for You
1. Level of control
When you imagine owning a business, what do you picture your role to be? Are you managing a team? Selling a product of your design? Running multiple storefronts? Depending on your goals, you may have expectations or nonnegotiables that will set the parameters for your future business.
If you opt for the franchise route, you don't control the brand, the product, the market research, etc. However, if your vision aligns with the brand, then much of the product/service offerings and development have already been executed and you've found a great fit.
Alternatively, if you desire to build a company from the ground up and want to develop the products/services and control all of the branding/messaging, then a startup business might be the better fit.
2. Finances and time leverage
A common warning about starting a business — you've likely heard it — is that you must be prepared not to make a profit for the first year or two. While it's true that you shouldn't expect immediate profit, it's important to know that, depending on the kind of business you choose to operate, there can be significantly different time expectations.
Because franchising has all of the pieces in place to get business rolling, you have significantly more time leverage as well as national buying power. A major benefit of franchising is that you've got the backing from a company that has a larger budget. On day one, the company infrastructure is already in place and the customer experience is streamlined.
Conversely, depending on your financial requirements, a startup will likely require a larger time investment before you make a profit. Your business may need to begin as a side hustle or include early fundraising efforts to achieve buying power. While there are certainly avenues for obtaining the necessary capital, you'll need to be more creative in discovering financial support.
Related: Should You Buy a Franchise or Start Your Own Small Business? Ask Yourself These 5 Questions First.
3. Branding and marketing
A vital element of business ownership is effective marketing and branding — a daunting task unless you have previous experience.
In franchising, you are provided a blueprint and the proof of concept has already been completed. Brand recognition is a major asset, since your logo and branding materials already have national recognition backed by large digital marketing power (while you are only paying your small share, you get the benefit of a national company's branding and marketing). From a PR perspective, it's important to remember that you don't control the brand as a franchisee, but your reputation is tied to the larger corporation (consider Subway or other companies that have had a scandal).
A startup must create branding and marketing from scratch. You may be able to design these elements yourself if you have the right skill sets. Otherwise, you may need to fulfill your design needs by hiring a contractor or freelance designer (which can be a considerable expense).
4. Research and development
Any time a new product/service becomes available at a company, a million little decisions have been made to make that product possible for purchase.
In franchising, your business will benefit from the shared research and development of the larger brand. Companies with a national footprint have the capacity to extensively beta-test new processes and products.
Because of their limited initial size, startups have smaller data samples. Furthermore, because they stand alone, startups lose the benefit of documented best practices. That said, unlike a franchise, a startup doesn't have to acquiesce to any particular new product/service that the franchisor is offering.
5. Staffing and training
If you are interested in owning a company that requires additional employees or you dream of scaling up, then you need to have a staffing and training plan.
Because of the above-mentioned blueprint, franchising comes with defined roles, a clear company profile and set pay ranges for new employees. Training will be structured to mirror national standards and you will have a playbook before you open your doors for business.
In a startup, you have the ability to be flexible and maneuver quickly as you learn what roles you require. However, it can be difficult to define roles before hiring or before you fully have a grasp on the parameters of each position. And if you want standardized training, you'll have to create it or outsource it.
6. Shared knowledge
In the beginning stages of any business ownership venture, it's important to educate yourself. Maybe you have sales experience but aren't up to date on content marketing, or maybe you are a skilled designer but aren't familiar with CRM tools. Being a business owner has a way of quickly highlighting your areas of needed improvement.
A major benefit of franchising comes from the large community of other franchise owners within the company's ecosystem. This network allows you to speak with peers, discuss challenges and benefit from the collective knowledge of the larger group.
While it isn't as structured, as a startup owner, you can join peer groups that are tangential or related to the challenges you are facing, although they would not typically have anyone from your industry. However, seeking out a community of other entrepreneurs where you can connect and share ideas will help you be less siloed.
When you think about starting a business, are you excited at the prospect of charting a new path into the unknown and developing a concept, or are you motivated to own a business but less concerned with providing a certain good or service? Answering this question is important in starting to think about whether you should consider a startup business or franchise ownership.
