Franchising versus running a new business

Deciding to embark on a new business venture is always exciting, but it brings with it some tough decisions. One of the most important is choosing between buying into a franchise and an existing brand, or starting a new business from scratch. Ultimately, it will come down to your personal preference, as both options have pros and cons…

Let’s start with the fact that buying into a franchise effectively gives you a ready-made business. According to author and entrepreneur Cliff Ennico, this provides you with invaluable “safety, security and support” – three things that could prove really useful to first-time business owners. You’ll have instant access to advice on everything from choosing the right employees to effective marketing, something which those starting a business from scratch would have to not only source themselves, but likely pay handsomely for as well.

What are the other advantages of buying into a well-established brand?

In addition to this priceless support, in the case of bigger companies, franchisees have access to an instantly-recognisable brand. You can take advantage of the uniformity of it; reassured that consumers already view it as a reliable supplier. This leaves you able to spend time on other activities, like hiring and training your new workforce – all the while knowing that as soon as employees are ready to sell, they’ll have people who are ready to buy.

However, the arguable disadvantage of said uniformity is that it takes away the element of freedom. If you’re a particularly creative person with a specific vision, you may struggle to conform to the existing messaging and goals of the brand. Starting your own business from scratch means you have full control over the products, the suppliers and the marketing – this is a priority for some people.

Ok, so how do the financial aspects differ?

You may be leaning one way over another by now, but it’s important to take into account the financial pros and cons of both options too. Admittedly, the initial outlay of starting a business from scratch can be less than that associated with becoming a franchisee. If you have limited funds, this might sound attractive to you – but also consider the fact that successful brands may have solid relationships with lenders that you could only dream of. This could mean securing the capital needed to launch a new business is much easier when done as a franchisee.

What’s more, the fact that you’re selling under the guise of a well-established brand name means you can potentially make more money over a shorter period of time. Consider this though – you may turn a profit quicker, but entering into a franchise agreement means you’ll probably have to pay royalties to your franchisor for years to come. Would you rather make more money now and continually give someone else a cut, or wait a little longer for your profits but ultimately keep them for yourself?

It’s your choice…

Ultimately, choosing between investment in a franchise or starting an entirely new business comes down to three main factors. These are:

• Experience – do you have the knowledge, skills and experience required to start a company from scratch?
• Finances – do you have either the start-up money needed, or strong relationships with financial lenders?
• Priorities – what’s more important – creative freedom and control, or support and instant profitability?

Only by taking each of these into account and looking at them realistically can you make a logical, worthwhile decision.