10 things to consider about buying a franchise or setting up by yourself
It’s a conundrum that needs an answer: is it better to invest in a proven system or go it alone as an independent operator?
Perhaps you have asked yourself these questions repeatedly.
On the one hand, is it better to open your own business and spend less money upfront? That way you might also save on the on-going costs of partnering with another franchisee?
On the other hand, is it simply wiser to back yourself with a leading brand in the ultra-competitive business market? Is it perhaps a case of – if you can’t beat them, join them?
There is no one answer to this – individual choice and preference is paramount.
So how can you find your way through these puzzles?
Here is the low-down on opening a start-up and joining a franchise:
Going it alone
- Less cost upfront: All businesses come with risk, but generally speaking starting up your own business comes with less upfront costs. This is unlike a franchise which can go up to the six digit mark initially to fund training, fit out and working capital. However, without the initial costs of a franchise which are used for training, the independent operator is left to develop those skills over time. Also, ongoing franchise fees used for marketing expertise may require a start-up entrepreneur to spend on outsourcing these services.
- You wear the pants: In most effective franchise systems, franchisees are encouraged to share their ideas and play a role in the betterment of the business, but at the end of the day, the franchisor always wears the pants. When you go it alone, the pants are yours.
- Disruptors and risk-takers aboard: Although all business ventures come with risk, engaging in a start-up is the quintessential example of this. But this doesn’t mean taking risks are all bad –look at where it’s taken Shyam Bhartia, the chairman of Jubilant Foodworks Ltd which holds franchise rights for Domino’s Pizza and Dunkin Donuts in India.
- Entrepreneurs welcome: If you’re an entrepreneur at heart that is ready to disrupt with innovation, opening an independent business is a more suitable option. This is because proven franchise systems are designed to be followed.
- Bring on the competitors: As independent business owners, entrepreneurs are open to competition in territories from other operators and franchises. So it really is a case of ‘may the best man win’.
Joining a franchise network
- Less risk in the long term: As mentioned, all business ventures come with risks, but in a franchise model, franchisees are backed by proven business systems and processes.
- Power of the brand: the franchisor’s connections together with the power of the franchise business can help land franchisees better deals in rent and suppliers; reducing costs in the long term.
- A hand to hold: A good franchisor can be a great mentor as you learn the ropes of running a business. They can provide ongoing support throughout the franchise term. This is an advantage compared to the independent operator who would need to hire a mentor for support and guidance.
- You’re not alone: Heading up a business can be a lonely feat, but not necessarily in a franchise system. Think of other franchisees as competitors but also peers. Ideal franchise networks champion the support aspect of the business.
- Location, location, location: You could get a great location and may not need to compete with the franchisor or other franchisees customers within a territory.
So the best pathway depends on what you’re looking for and which option suits your situation.