Franchise vs Startup Business– Based on history, a struggling economy encourages entrepreneurship. This leads to a significant increase in a new startup business. The decision to start a business usually winds down to either going at it alone or buying a franchise. If someone is a hard-working professional but has limited business knowledge and resources and needs a roadmap to be guided than a franchise is a good option for them.
When deciding which alternative (franchise vs. startup) is the best choice it is important to understand the advantages and challenges of both the options.
Advantages and Disadvantages of a Franchise
Higher Success Rate
A franchise is a proven system that operates under a common system. One is responsible for day to day operations. Training is provided for the product line, marketing, ways to deal with the staff, and ways to deal with daily activities. Franchisees get ongoing support for their business which therefore leads to their success.
Brand Recognition
From day one a franchise brings an awareness of the brand through its name. Therefore, customers will be aware of the product which will lead to an increase in sales.
Buying a franchise is like buying a turnkey business which is ready and waiting to be started.
Fees
There is a fee that has to be paid for buying the franchise and an ongoing fee has to be paid to the franchiser. The fee for buying a franchise is usually very high. After which, a monthly fee and or royalty has to be
No Freedom
In a franchise system, one has to follow strict guidelines from the franchiser. There is no freedom to change the product line or decorate the store by choice. In order to protect the franchise license, it is important to follow the contract to the letter.
Advantages and Disadvantages of a Startup
Innovation and Creativity
In order to establish a startup, it needs innovation and creativity. It is a good idea for someone who is highly creative, full of different idea, and wants to turn these ideas into reality.
Professional Freedom and Growth
Running your own business provides you with the freedom to run the business on your own terms. This means you set the playing field as you see fit. In terms of growth, the sky is the limit when it comes to startups. When one is a
Higher Failure Rate
Compared to a franchise business, a startup business has a higher failure rate. According to the statistics, during the first year 25% of startup businesses fail and within five years the remaining 50% fail. Within the last couple of years, approximately 30% of startups failed in their first year. Therefore, it is very risky to launch a startup business, but with that, it should be kept in mind that the higher the risk the higher the return. Succeeding as a startup can even lead to making one a billionaire.
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Startup is the way to go but great analysis.
Thanks for the great article!
Thanks, it is very informative
This is really helpful, thanks.