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Is It Safer to Buy a Franchise or Start Your Own Business?

Written by : Expert Articles
2009-09-14
As many first-time business owners find out, there is a high failure rate for independent, non-franchise businesses. Franchising provides a proven system and the support of a much larger organization. If you are first-time business owner the benefits of buying a franchise are even greater. Some of the advantages of buying a franchise over starting an independent company include instant brand awareness and credibility, administrative and/or technical support, franchisor-provided training, quicker return on investment, strong management, and a network of other franchisees and associations dedicated to supporting franchisees.

As a franchisee you typically have support every step of the way from people who are vested in your success, as well as knowledgeable about your particular business. As part of a franchise system you can count on the efforts of your fellow franchisees to compliment your own marketing programs. If a franchise in the next community or town sponsors an event, commercial or other promotion you will undoubtedly reap the benefits of those efforts. If you enjoy your particular franchise the opportunity to open additional outlets are improved over an independent business owner looking to open another store.

As an independent business owner you have to contend with franchise heavyweights that have a lot more resources for advertising and marketing, as well as ready-made brand recognition. Starting out you may have few time and monetary resources for getting your name out. If you are starting a new business you may be putting all of your energy into operations. Who will drive the sales campaign? Who will find, qualify and bring in the customers? While there is more creative autonomy in an independent business your chances are much higher as a franchisee of making it in cut-throat markets like food service, hospitality and retail.

A franchise business is definitely the safer opportunity. This study carried out over 7 years revealed that after seven years, over 90% of new franchises are still in business, as compared to only 20% of individual new start-up businesses. Most people, who do start a business by themselves, end up failing and losing a lot of money. I now that this is a sad fact, but it's true! If you start a business on your own, you have to make all the decisions regarding location, layout of premises and find and vet all suppliers.

With a franchise business, the franchisor will advice you on all the above. In fact, you might even find that you are told where to locate your business, who your suppliers are and have some choice in pre designed layouts.

A franchise business provides you with the consistency and quality throughout the franchisors territory. This leads to higher levels of customer satisfaction. The franchisor provides full training and support in running the business. If a site is required, the franchisor will assist the franchisee in selecting a site that fulfils the demographic requirements of the product.

A business start up has to learn from trials and errors until they hit on a formula that works. They have no training or support in managing their business opportunity. If any thing does go wrong, and in most businesses, it does, then they have no one to turn to for advice. The advantage they have is that there is no one looking over their back, telling them what to do and how to run their business.

The franchisee benefits from national marketing which is spread out amongst all the franchisees, enhancing the economies of scale. New products can tested in certain territories before they are rolled out nationally. A new business will have to trail any new products with their own capital and take the full brunt if the experiment fails!

The relationship between a franchisee and a franchisor is well balanced. Both parties need each other to survive and create a profit. Ongoing support and training is usually available for franchisees who are struggling. Due to the higher success rate, banks are inclined to lend a higher percentage of start up costs in a franchise business then they are to an independent start up. They are also more likely to give extra leeway when more funds are required.

If you have decided to go down the franchising route then it is important that you choose a franchise that is right for you. Don't just go for the opportunity that will make you the most money, instead, choose a business niche that you will enjoy. Decide how much capital you have to invest, and then choose the franchise opportunity that best fits your lifestyle. Decide how many hours you want to work and how many employees you are capable of handling.

Once you have made up your mind to buy a franchise, always have a contingency fund as there are always unexpected costs that arise in the initial years of running a business.

If you decide to go it alone, make sure you speak to other people running the same type of business in other parts of the country and learn from their experience. You will find other businesses in the same field as you more then happy to part with their experience once they realise that you are not going to compete in their territory. Make sure that you take professional advice before deciding to follow the franchising route or starting a business on your own.

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