Boss Lady

Start-up vs franchise: Which one works best for you?

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Do you possess that entrepreneurial spirit? Are you dreaming of running your own business, and the independence and freedom that it brings? If so, you’re certainly not alone. There has been a significant increase in the number of self-employed people since the turn of the century, and it’s estimated that there were 16 million in the US and 4.95 million in the UK, in that category as of September 2019.

Data shows that between 2018 and 2019, the total business population grew by 3.5% – encouraging statistics for budding businessmen and women. But the caveat is that 20% of start-ups are forced to close within the first year. With that in mind, perhaps becoming a franchisee offers a more secure route to success?

We’ve examined the pros and cons of running a start-up versus managing a franchise…

What is a franchise?

Franchising is where a company which has already established its brand and gained customer loyalty chooses to show others how to replicate that success. For example, McDonald’s stores are run by franchisees, who are responsible for the staff and the food they sell. This is done under the guidance of the brand and, of course, under the instantly recognisable golden arches logo.

Franchising: The pros

Working under a brand means you’ll benefit from a solid customer base and you’ll have to invest fewer resources into marketing and advertising. You’ll be operating from a tried and tested business plan, while you’ll also receive ongoing support from the franchisor – be it financial or in the form of training and education.

Franchising: The cons

One of the major drawbacks is that you’ll have to pay the franchisor a lump sum to get set up and thereafter they’ll take royalty payments in exchange for your use of their brand name. Additionally, there’s not as much scope for you to put your personal stamp on things. You might be restricted by company policy and your creative instincts may be curbed as a result.

Start-up: The pros

If your ultimate dream is to achieve true independence in the business world, then striking out on your own is the way to go. There are of course risks attached, but you have full control over the future of your company. You can choose your branding, the products you sell, the staff you hire, your marketing strategy and any profits you make are yours to reinvest as you see fit.

Start-up: The cons

The downsides are that the fate of your organisation rests solely on your shoulders, and that’s a large responsibility for anyone to bear. Funding can sometimes be an issue, although the likes of Nucleus’ business cash advance can be a godsend for SMEs looking to establish themselves. Especially in the early days, the long hours can take their toll and you won’t benefit from the guidance and support a franchisor would provide.

In truth, there’s no right or wrong answer – you need to weigh up the strengths and weaknesses of each argument and make a decision that suits you.

About Samantha Halmshaw

samanthah@thebusinesswomanmedia.com'

Samantha Halmshaw is a marketing and sales advisor who specialises in the digital industry. In her spare time she produces commercial art and graphic design.

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