Owning a Franchise or Owning a Business: What’s the Difference?

owning a franchise

Are you looking to make your dream business a reality someday? Are you great at managing a business but not at creating one?

Depending on your strengths, it may be better for you to either buy a franchise or a startup business.

According to a study by IHS Market Economics in 2018, franchising accounts for $404.6 billion in GDP. For the small business community in the US, it contributes an estimated $8.5 trillion to the economy.

If you plan on establishing a business or owning a franchise in the future, it’s best you understood the differences between both.

Below, we’ve got a comparison between owning a franchise and owning a business. Read further to check out the pros and cons of each compared to each other. In the end, we included some advice on choosing between the two commercial endeavors.

Owning a Franchise

Before we proceed, you may ask, what is franchising? This is a business relationship between a franchisor and a franchisee. Franchisors are owners of an established business allowing franchisees the right to market the franchisor’s products or services.

Franchises could range from convenience stores to commercial professional cleaning services. Successful and well-known franchises include McDonald’s, InterContinental Hotels Group, and Anytime Fitness. In essence, it’s any kind of business expanding with new locations.

Upfront, franchise businesses have a lower total investment cost. The catch is that franchise business owners need to fulfill the requirements that franchisors set. Also, franchisors handle the projects, timing, and remodeling of a franchise business.

Buyers who lack experience in the industry choose to buy franchise businesses. The developed factors make it easy for first-time business owners. These factors include access to a business system, corporate support, and supplier network.

Owning a Business

With your own business, you start from the ground up. For business owners, you need to find your own operational resources or create a way to gain some. You build up your own human resource and other departments.

Launching your own business can be fun but keeping it afloat can be a challenge. Investment costs for small business owners to buy and operate will be higher. On the bright side, you have the ability to develop the aesthetic, products, and brand that you want.

A business’ independence gives the owner more control over investment decisions. You get to decide where you want to invest and how much you’ll invest in it. Furthermore, you can choose to downsize the scope of projects if the income is tight.

Did you know that 69% of entrepreneurs start their businesses at home? If you feel that you will be able to handle the stakes of a startup business, why not start your own? You never know when your business may one day become the franchising parent company.

Comparisons: Pros and Cons

Let’s talk about side-by-side comparisons for owning a franchise and a business.

First, buying a franchise is perfect for first-time business owners. In essence, it’s a turnkey business that is waiting for you to take the reins. Everything is ready and all it needs is an owner to manage it and a new location.

Already, there’s an existing customer base, documented cash flows, and a workforce in place. Depending on the franchise, you could either buy a location that is fully operational or build a new one from the ground up. Should you need an exit plan, you can sell it to a new franchise owner.

Buying into a franchise will not allow owners the freedom to make many changes. They have limited marketing strategies, products, and services. This makes the franchise ownership model different from the typical business model.

Small businesses, in comparison, allow owners total control over their products and services. If the market conditions change, you can create a new marketing strategy to adapt. For many business owners, you are your own boss but you are also on your own.

Since businesses are an original project, you need to get your own funding, employees, and more. You need to create a customer base from scratch and learn to keep records. It’s a chance to make your dream come true but it’s hard work.

Choosing Between a Business or a Franchise

There are some factors to consider when you want to own a franchise or build up your own business. As you can see from above, each has its own strengths and weaknesses. See below for the situations you may find yourself in when you choose either.

Do you want a quick return of investment? Franchises like Subway could do the trick for you since they are already popular. Starting your own business can take a while to get that ROI.

How creative do you want to be with your products and services? If you want the ability to change your services every few years to match demands, launch a business. With franchises, you must refer to the parent company for changes in products or services.

How much budget do you have? Buying a franchise can cost less. For more details on becoming a franchise owner, check out our guide here.

Think about employee training and such. You may know how to do the thing that will make your business boom but can you train employees to do the same? A small business is great for you if you’re willing to train hired employees, keep the books, and more.

The success rates for both vary. Every day, many franchise businesses and small businesses fail and succeed. It all depends on the owners.

Profit from a Franchise or Startup Business Now

That’s our guide and comparison between owning a franchise and owning a business.

Remember that whichever you choose to get, hard work and wise decisions will make you go far. Your approach as an owner will dictate how well your choice will work for you.

Now that you know which will be best for you, what else are you waiting for? Get started on making those business plans or buying your franchise.

Do you need help in getting into a franchise business or running your own? Visit our blog for informative posts on the subjects. You can also contact us today in case of inquiries.

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