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Jul62018
INDUSTRY

Investing in a Franchise System vs. Starting Your Own Small Business – Which Strategy is Right for You?

There are a lot of paths you can take when becoming an entrepreneur. Maybe you’ve been working for an established company for years and are looking for a new career path. Maybe you’ve been serving in the armed forces and are looking for a challenging post-military career. Or, maybe you’re about to graduate and are entering the work force full-time.

Regardless of where you’re at now, if you share some of the main traits of entrepreneurship - motivated, innovative, diligent, dedicated, ambitious, independent – and want to embark on a path that allows you to be your own boss, then starting and owning a business can be a solid career choice.

But, it’s important to find a business style that fits you. For most entrepreneurs, that means choosing between investing in a franchise or starting your own business. There are pros and cons to each path and it’s important that you weigh all the factors before making your choice. 

Investing in a Franchise System vs. Starting Your Own Business

To help you make that important decision, we’ve listed out a few key factors along with the advantages and disadvantages of running each type of business.

Starting Your Business

One of the biggest differences between investing in a franchise and starting a business from scratch is the initial startup process.

When you start your own business, everything is on you. As a new business owner, you have to develop:

  • Branding elements – your business’s logo, colors, signage
  • Product and service offering – what you're going to sell customers as well as how you plan to go to market (e.g., systems, processes, supplies, inventory, fulfillment, etc.)
  • Positioning – why consumers would want to buy your products and services
  • Store layout – how to present your digital and physical properties (i.e., the face of your business)

When you consider buying a franchise, those elements are taken care of for you (or, at least they should be). It’s part of the reason you pay a franchising fee . Most franchise networks have support systems in place to not only help you get off to a solid start but also support you as your small business grows.

If you’re excited about the challenge of building your own company from the ground up and are comfortable with the possibility of working long hours for little pay at first, starting a new business could be for you. However, if you prefer to start with a proven business model to help get your business positioned to grow quickly, having the support of a franchise brand cam be very helpful.

Building Your Business

When it comes to growth, deciding between investing in a franchise organization and starting your own business is a risk vs. reward proposition.

Starting your own business is often the riskier option. According to an article in Entrepreneur Magazine, “25 percent of startup businesses fail within their first year, 50 percent of the remaining fail within five years and approximately 30 percent of the remaining last ten years.”

That means more than four out of every five new businesses wash out within 10 years of opening.

Growth is typically more gradual in franchise systems but the opportunity is there. While no business venture offers a guarantee, having the support of an established franchise brand does increase your chances of success.

And, many franchise brands offer multi-unit ownership opportunities. Owning multiple units within a franchise system affords the dual advantage of increasing your business’s footprint while allowing you to delegate more of the day-to-day operations.

Innovation and Creativity

If you thrive on creativity and innovation (as many entrepreneurs do), starting your own business sounds like the obvious choice. But, that doesn’t mean you should rule out investing in a franchise. Many brands allow franchisees the opportunity to innovate both within their own store and in their network. Franchise networks often establish committees that encourage owners to work together to develop, approve and manage various business, product and marketing projects.

Some franchise brands even offer non-traditional locations to accommodate entrepreneurs looking to grow their existing product offerings. For example, The UPS Store – Entrepreneurs fourth-ranked franchise in their latest Franchise 500 list – allows business owners to set up non-traditional centers within their existing businesses. This allows businesses like pharmacies and hardware stores to provide even more value to their customers, attract new customers, and become more of a one-stop shop by providing printing and shipping services in addition to the existing products and services already available.

Making the Decision

In the end, your decision depends on what business ownership style best fits your personality. Starting your own business allows you the freedom to explore any venture you want; but, it comes with the risks and responsibility of being completely on your own. Investing in a franchise business provides the framework within an existing business model while still enabling you to be your own boss,  expressing your creative side within the structure of a proven system.

With a decision this important, you need to dig in, exercise due diligence and find the path that’s right for you – like any good entrepreneur would.