When it comes to opening your own business or buying into an existing business, there are several different ways that you can get started. You may have the option of everything from buying into an existing business, buying a franchise, starting a franchise out of your existing business or expanding the existing business or franchise that you have.
Are you familiar with the risks and benefits associated with franchising?
How about the pros and the cons of starting and growing your own business?
In sincerity, deciding to start or buy into your own business is a lengthy and tedious process that requires a lot of research. You need to put in that time and research upfront in order to minimize risk and maximize the earning potential for your future business and investment.
Today, we are going to walk you through some of the benefits and the drawbacks of starting your own business and what that looks like when compared with investing in a franchise.
So what is a franchise and how does it work?
A franchise is a business that allows entrepreneurs to use their name, trademark, systems, and operations as their own, in exchange for a franchise fee and ongoing royalty costs.
Famous examples of franchises include:
- Dunkin’ Donuts
- Jimmy John’s
- Orange Theory
- Anytime Fitness
Buying into a franchise can be wise because you are buying into a business that already has national, international, or regional brand awareness. With an existing fan and customer base, it can make it easier for entrepreneurs or franchisees to get customers in their doors and build a base of loyal or repeat customers. When you become a franchisee, you are basically a licensee of that franchise’s name, trademark, operational methods and business systems.
If you are on the fence about opening and starting your own business from scratch, opening a franchise can be a safer route to travel down. When you are an entrepreneur, you are often left to your own devices to find solutions for problems, and you can run into some unpleasant surprises along the way.
As a franchisee, you will have access to support, advice, and research from your franchisor.
Thankfully, the franchisor and founders of the company have run into many challenges already, and over the years have put systems and solutions in place so that you don’t have to repeat the mistakes that they have made. That makes it infinitely simpler and less frustrating to get your business going.
The franchisor will often give you operations manuals, systems, guidelines and personal advice so that you can get your business opening and growing without too many wrenches in the works. These companies will even offer direct support from experts within the company for anytime that you need advice or are facing issues that are relevant to your franchise.
Some of the greatest pros of buying a franchise are related to the fact that you are already buying into a business with customer trust and brand recognition. When you put your sign up and open your doors, there is a good chance that there are customers in your area that are already brand loyalists as well as potential customers who already recognize the name, signage and reputation of your brand.
It makes it much easier to get your first sale and begin growing your revenue when you already have people who know who you are and trust in your brand name.
When buying into a franchise, all of your operations and systems are already in place. Instead of having to use trial and error to figure out the best way to run your independent business, your franchisor or parent company will give you all of the tools and the systems that you need to be able to run your business smoothly and effectively.
Franchising can also make it easier to grow your business. In many cases, franchisors will let you and other franchisees know when other location opportunities become available for your business.
You are also getting access to experts and advisors within your business. Buying into a franchise system, a great brand has already been established by the franchisor, a creative logo has been created and the logo has been trademarked in order to provide protection for you and other franchisees. A professional website has also been created and is fully maintained by the franchisor. Franchisor also has created and fully maintains all social media channels for the business, leaving you time and resources to concentrate on running and growing your business. All of the items specified above take time, money and resources in order to accomplish. This means that you can open your business sooner and look more professional right out of the gate with a franchise system.
Your franchisor and other franchisees in your network will be able to give you updates on when existing franchises within your network go up for sale. They will also keep you posted on new locations and spaces open up for development for franchises in your network.
The cons to buying into a franchise are largely associated with a lack of independence. When you go into a franchise, you have to pay an initial or recurring fee and royalties to your franchisor. That payment is for the ongoing use of the franchise’s name, reputation, operations, etc.
Being under a franchisor also gives you a lack of control over your business.
There are many standards that you are going to need to abide by when you are a franchisee that are mandated by the franchisor. Infractions of those standards can be punished with penalties from your franchisor.
All around, opening a franchise is a great way to go if you are interested in running your own business while minimizing the risk of starting one on your own. Franchises will give you a federally trademarked brand, a well-tuned systems and operations and all of the resources that you need for getting started. Keep in mind that you will relinquish certain control aspects to them and you will have to pay ongoing fees, but in return you are getting brand recognition and minimized risk by using a tested infrastructure.
What Does Starting your Own Business Look Like?
Starting your own business can be one of the most exciting and also terrifying processes of your life.
When you choose to start your own business, you are in control of everything from obtaining the financing for your business and getting the doors open, to growing your sales and expansion.
When you are opening your own business, you have a long road of research ahead of you. Before you ever open your doors, you should know everything about the market you’re in and have a finely-tuned picture of exactly who your ideal customer is.
You are going to be constantly working on improving your systems and operations, developing new marketing strategies, learning how to advertise and everything else that is involved with the responsibilities of starting and running your own business.
Pros of Starting Your Own Business
The biggest pros of starting your own business revolve around the fact that all of the control is in your hands. You are responsible for everything including
- Finding the space for your business
- Establishing a name and logo for your business
- Figuring out any relevant zoning and licensing that you need to obtain or abide by
- Where you are going to get your equipment from
- How you are going to design and build out your business
- Sourcing the products and services that are relevant to your business
- How you market your business
- Choosing your advertising strategy and budget
- …and ultimately, how you sustain and grow your business
You have the complete freedom of how you are going to run it and depending on where and how you open it, what your hours are, who you hire and what the dress code is going to be for your employees or your team.
Cons of Starting Your Own Business
The greatest cons of starting your own business are that there is a lot to figure out on your own.
You can study businesses like yours or in your market or niche to get a good idea of how to run your business and what your earning potential will be like. The chances though that you are going to be making mistakes along the way and using those experiences to put your own systems and solutions in place to solve those problems. Some mistakes that you face you will be able to recover from, but others could be riskier and lead to the detriment of your business.
Whereas with a franchise, you get the benefit of having systems in place for avoiding those risks and mistakes. They will give you templates and resources for solving and preventing problems.
With your own business, you are starting from scratch.
You need to come up with a a name and make sure that the name you select doesn’t infringe on someone else’s already established trademark. You then have to come up with a logo, design a website, design your sales brochures, business cards, etc. You then have to apply for a trademark for your newly established name and wait to make sure that the trademark is accepted by the U.S Patent and Trademark office. If rejected, you have to go back to the drawing board and come up with a new name and logo.
Unless you have preemptively built up a social media following online or started running your business out of your house, your community probably has no idea who you are. In many cases, you are going to have to aggressively market yourself in your area so that you can let your community and potential customers know who you are, what you do and where you are located. Unlike franchises, who have an existing reputation to rely on.
The Final Rundown
Hopefully you now have a better idea of some of the benefits and the costs that come with opening a franchise vs. starting your own business. There are advantages to both, but opening a franchise certainly has the most number of advantages over starting your own business. Opening your business presents the highest amount of risk. The main way that you can be sure that you are selecting the correct path is doing as much research as possible before making your decision.
Franchising is being employed by more businesses and more types of businesses than ever before.
Today, franchising is the chosen method for successful business owners who are looking to grow their concept quickly and without investment of more capital.