Buy a Franchise vs Start Your Own Business

Should I buy a franchise or start my own company?

Ultimately, that’s up to you to decide. But it helps to layout the pros and cons of both situations. Your aversion to risk, business experience, and financial considerations should all be taken into account.

Pros and Cons of Starting Your Own
Whether purchasing a franchise or starting your own business, one of the most common reasons indicated by would-be entrepreneurs is to be their own boss. It’s a great feeling to have that autonomy and freedom of decisions. It’s also very rewarding.

If you have the financial wherewithal to fund, and in some cases ‘bootstrap’, your business, starting your own can be the way to go. Even if you start your own company in the evenings and on weekends, still keeping your day job until it’s up and running, being your own boss is a powerful draw.

But there is a higher failure rate among new business ventures than among franchises. There is no franchise support, no franchise community to ask for advice, and it’s often more difficult to get financing for a company that doesn’t already have a track record. There are also no economies of scale in terms of purchasing and real estate, no brand recognition, and higher costs for things like advertising and design – costs that are shared in a franchise system.

Pros and Cons of Purchasing a Franchise
Perhaps the biggest perceived drawbacks to purchasing a franchise are royalties and other fees paid to the franchisor. The trade off is that many of the negatives of starting your own business are mitigated or eliminated: franchise support, purchasing power, research and development costs, real estate and legal help, construction help, and a proven model with instant brand awareness. A franchise fee and royalty payment (usually a percentage of what you have made) are often small potatoes compared to the ‘tuition’ charged by the ‘School of Hard Knocks’.

Franchises charge a fee for a reason: they went through the pains of developing products, systems, and a brand image to be successful. Consequently, the failure rate for franchise systems is lower than most new businesses.

It should also be noted that not everyone fits into the mold of being a franchisee. For some, the thought of being accountable to rules and systems of others is too constraining. Again, it’s up to you to weigh your aversion to risk with your need for autonomy.

Keep in mind that the strongest argument for purchasing a franchise is brand recognition. To open your doors with a customer base from day one, get preferred pricing on equipment and supplies, and have a network of support is a powerful motivator. But if you open your franchise in a new market where there is low unit density, the advantages of brand awareness are diluted – which could cost you more money in advertising and grand opening costs.

You may also find that real estate is harder to come by and distribution challenges might make your cost of goods higher than a unit in the franchise’s hometown. Careful research and questioning of franchisees in less developed markets will help you to gather the information you need to make the right decision.

Things to Consider No Matter Which You Choose
Consider what it really means to be your own boss. Being the boss of a start up, whether it’s your own or a franchise, also means that you’re in charge of everything – from sales and accounting to healthcare and sweeping the parking lot.

Being the boss means leveraging your savings, sometimes even your equity, all for the privilege of sleepless nights worrying about payroll. For many, these arguments are a strong reason to continue working for someone else.

But for thousands of Americans every year, living the American Dream of starting something from the ground up, even if someone else helps to point the way, is too big of a pull. Conducting research, asking the right questions of the right people, and knowing some of the hidden risks ahead of time help to make sure your final decision is the right one.

Consider what it really means to be your own boss. Being the boss of a start up, whether it’s your own or a franchise, also means that you’re in charge of everything – from sales and accounting to healthcare and sweeping the parking lot.

Being the boss means leveraging your savings, sometimes even your home equity, all for the privilege of sleepless nights worrying about payroll. For many, these arguments are a strong reason to continue working for someone else.

But for thousands of Americans every year, living the American Dream of starting something from the ground up, even if someone else helps to point the way, is too big of a pull. Conducting research, asking the right questions of the right people, and knowing some of the hidden risks ahead of time help to make sure your final decision is the right one.

To view additional articles on franchise opportunities and compare profiles of more than 1,800 franchises for sale, please visit www.FranchiseGenius.com

This publication is copyright 2008 by Franchise Genius LLC. This copyright notice and any embedded links within this publication must remain as part of this document.

Brilliant
Ideas

Firestorm Franchising
$50,000 - $115,000

Firestorm provides crisis management, risk mitigation, & business continuity & pandemic plans. Our PREDICT. PLAN. PERFORM. Process creates a strategic advantage for clients to outperform competition.

The Tan Company
$187,750 - $251,000

The Tan Company is a tanning salon. The Tan Company offers 5 Star tanning facilities, and world-class skin care products in a clean tanning environment.

Bookeeping Express
$75,000

Since its inception in 1984, Bookkeeping Express has helped thousands of small businesses throughout the United States. We focus on in-house financial reporting along with providing sound business strategy that helps drive annual revenues and profitability.

Kidville
$60,000

Named Best of by New York Magazine and given a five star extraordinary customer rating in The Lila Guide: New Parent Survival Guide, Kidville operates large, upscale facilities, catering to young children and their families. In addition to offering a wide range of developmental classes for newborns through six year olds. Kidville also features an indoor playground, a retail boutique, the Kidville Salon and birthday parties for children up to age nine. There are currently two investment levels. 1. Our Stand Alone Annex Model (3,350 square feet) investment level is $198,150 -$262,900. 2. Our Hub Model (8,000+ square feet) investment level is $615,560 - $777,400. You are able to choose the model that best suits your community and investment level.

Math Monkey Knowledge Centers
$60,000

Math Monkey reintroduces math to children ages 6-14 in a way that is fun, challenging, and something they can master. Math Monkey's curriculum uses games and puzzles to engage children in math and gain confidence.

Mainstream Boutique
$20,000 - $45,000

Mainstream Boutique is an exciting retail and fashion franchise concept that sells some of the fashion world's most unique clothing, accessories and giftware at franchise-owned retail stores, and a variety of direct sales venues such as home parties and corporate sponsored events. Our clientele is all ages, all sizes and always on the lookout for something out of the ordinary at affordable prices. Our franchisees are savvy, sales-oriented, and love working with people. Whether you are looking for the perfect outfit, or the perfect business opportunity, Mainstream might be for you!

Mac Tools
$18,000

Mac Tools provides quality tools, tool boxes, power tools, electronics, and specialty tools to technicians worldwide.

Acti-Kare
$25,000

Acti-Kare helps seniors remain in the comfort of their own homes, and as a franchise owner, you will be able to help families in your own community help their loved ones live happier, more active lives.