Guest post by The Franchise King®, Joel Libava
Please read the title of this post again. Look at the last two words. That’s right; it’s about what is better for you. Please don’t base your decision on what your well-meaning friends, relatives, and MBA friends suggest.
The business model of franchising is totally different than a “business opportunity” type of business, (like vending machines) and it’s really different from a business that you come up with on your own.
People who are looking at franchises are looking to get into business for the same reasons that people looking at non-franchise businesses are. But, it’s also about speed; speed to market. (In the case of franchising.)
Think about something as simple (or what used to be simple) as a cell mobile phone. Every 6 months a newer, shinier one comes out. Users barely have time to get used to their current phones, and then a new one comes out, and it’s time to learn. Again! But, heck, maybe you like having the latest gadgets for your cool home office.
Our businesses change really fast now, too. Do you run your business exactly the same way you did a year ago? Or, are you offering new services and products? Have you had to get creative, because of the lousy economy?
If you’re a non-franchise business owner, coming up with sorely needed new ideas on services and products is challenging, especially when you’re trying to actually run your business!
Advantage of a franchise. There’s a team of people at your franchise’s headquarters. They’re always on the lookout for new markets, and new opportunities. They can test them out. They can lay them on you when they’ve been tested. It’s a strategic process. It would be tough to do if you’re a non-franchise business owner. You probably don’t have a “team” of people at your disposal.
Of course, there’s a cost involved with having a team. The cost comes in the form of the up-front franchise fee, and the monthly royalties, (a % of your gross sales) that you have to pay the franchisor.
Advantage of a non-franchise business. There are up-front costs involved (lots of them) when you invest in a franchise business of your own. Besides the franchise fee, ($25,000 on average) there’s usually specific equipment you’ll need, including a new laptop, software, and maybe some inventory. You’ll have to arrange travel for your formal training, and there will be other operations costs that you’ll be paying, up-front.
Here are some other advantages and disadvantages of both types of business models:
- Franchise businesses have rules; lots of them. Do you like 200 page operations manuals?
- Non- franchise businesses have rules, too; you are the rule-maker, though.
- Franchise businesses have specific marketing and advertising plans.
- Non-franchise businesses try different things, until they’ve found what works.
- Franchise businesses have other like-minded business owners. You can network with them. You can even have a few mentors stacked around the country that can help you figure things out. After all, they’ve probably experienced the same things.
- Non-franchise businesses are usually of the solo variety. You’re probably not going to talk with others that are doing what you do. They’re competitors!
- Franchise businesses are under contract. Most franchise owners sign a 10-year franchise contract. In it, mutual expectations are explained, along with enough legalese to keep an Ivy League law student engaged in learning, for months.
- Non-franchise businesses don’t have nearly as many legal requirements to deal with. They have to pay taxes, keep receipts, and maybe have some basic contracts set-up to use with vendors and/or suppliers. This one’s not even close.
There are other differences, for sure. There are a lot of things to think about before you become your own boss. You can choose to invest in a franchise business, and with it, have the ability to get to market fast, and have a support team in place to keep you competitive in the market.
You can choose to become a solopreneur, and try to “earn while you learn.” And have more freedom and flexibility. One thing’s for sure: if you can become your own boss, and be successful, there’s nothing quite like it.
The Franchise King® is the King of straightforward franchise information. The Franchise King Blog is his award-winning franchise business content/social media hub. Joel Libava is also a regular contributor for Small Business Trends, SBA.gov, and OPEN FORUM by American Express.
Franchises have a brand expectation that the franchisee is expected to upkeep. Small business sets the branding through their own message which creates its own brand image to the consumer. Big gap but yet the expectations are almost even. The small guy has to gain the awareness where the franchise puts up a sign on an empty building and people wait. No one is waiting for the new start-up small business to put up a website. We see a sign on a building, we wait, we see a “website coming soon” we never return until there is a site, if even.
Franchises are welcomed and waited for whereas a new business is playing by their own rules and devoid of 200 pages of legal jargon but has to tackle the challenges of hey I am here. Both have to prove, just one with less reading but more listening to obtain the exact same thing – providing a product or service that exceeds expectations.
Great to see you here Joel. Always a pleasure to read your works and all that you do to educate us on franchises.
Hi Joel.
Nice post. I think one of the main things to consider when choosing to start up you own business or buying a franchise is that in a startup you can call all the shots yourself. You are your own boss and as you said you decide the rules. This is not the case if you buy a franchise. As I see it one of the key advantages of a franchise is brand recognition one thing that a new business usually needs to work very hard at.
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