Franchise Vs Own Business

Who doesn't want to be independent? Everyday the boss instructs you to do this and that? Everyday you slave away only to return the next day. It is in the heart of hearts of most people to start their own businesses and be their own boss.


But starting a business is not a child's play. Their are too many challenges involved. There will be many people who would advise you to open a franchise rather than starting a fully owned business. That way, they tell, you will avoid many hassles. So, should you go for a franchise, or should you start your very own business.


Franchise Vs Startup : Which Is Best ?


I will present to you opinions both for and against franchise business and own business. Each has its own merits and demerits. Let's delve deeper -



Franchise : To Be Or Not To Be


Franchise Business : The Work Is Half Done -


In a franchise business, you don't have to work much to build your reputation from the scratch. The reputation of the company that you represent is your reputation. The customer base of the company that you represent is your customer base. When you start a business of your own, you have to gain the trust of the customers from scratch. There is no customer base. Neither do you get a head start. In short, you are on your own when it comes to owning a business.


When it comes to opening a franchise, you are don't need to start from scratch. The parent company will guide you in every step. Most high quality companies take the task of designing the interiors of the franchise on their shoulders - so that the franchise matches the overall theme of the parent company.


Franchise Business : The Risk Of Failure Is Almost Mitigated -


If you opt for an individually owned business, you have to try so many things to make your business stable and successful. For example, suppose you started a telecom business. You thought that you would opt for CDMA technology as diversification strategy. But later you realise that there are very few takers of CDMA.


This possibility of bad decisions is mitigated of you opt for franchise business. Think about it - A company which is searching for people interested in franchise should be having a solid and successful business in the first place. So you can leverage on the success of the parent company. You don;t need to try anything new or go into uncharted territory to make your business successful.


Franchise Business : Freedom From Red-Tapism -


If you open a franchise, much of the business related paperwork i done by the franchiser itself. From applying for trademarks registration to searching for manufacturing units - everything is done by the franchiser - not the franchisee. You just have to give business to the mother company.



Franchise Business : You Are Less Likely To Fail


Since you follow the tried and tested business strategy of the mother company in your franchise business, you are less likely to fail. You have the experience and skills of the parent company with you.


Franchise Business : Less Money Spent On Marketing -


Much of the marketing activities are done by the mother company in franchise business. Suppose you have the franchise of JBL Headphones. And the store across you sells proprietary headphones made by the store itself. The advertisement regrading the JBL headphones will be done by the parent company. Infact, it might also add that they have franchise (yours) on xyz road from where customers can buy products. The store across you has to advertise its products all by itself. In short, in a franchise business, brand recognition does 90% of the marketing.


Franchise Business : Success Is Within Reach -


In case of fully owned private business, the owner has to work day in and day out to make the business stable. During the initial years, the owner has to see loss, face challenges and experience disappointment.


In case of franchise business, the business is already half set. The customers already know the brand, the marketing and branding are done by the parent company. Hence, achieving success in a franchise business can happen quickly.



McDonald's Is An Example Of Franchise. Image By - Jeepers Media



The Case Against Franchise Business


There are 4 types of Franchise Business -


  • Franchise Owned, Franchise Operated

  • Franchise Owned, Company Operated

  • Franchise Invested, Company Operated

  • Company Owned, Franchise Operated

Each of these models has its limitations. In the Franchise Owned, Franchise Operated model, it will seem as if the franchisee is the king of the business. However, the franchisee has to meet the sales target fixed by the Franchiser. In the Franchise owned, Company operated model, the franchisee has to remain on the vigil always. If the company fails to deliver, it is the owner of the franchise who will suffer. Same is the case for Franchise invested, Company operated model. In the Company owned, Franchise Operated model, chances are that the franchisee will always face intrusion from the company - the owner of the franchise might not be able to work independently. Oh I almost forgot! You have to pay fees to the franchiser in order to start a franchise. The initial entry fee is quite enormous. This licensing fee can be a great pain point in the franchise business.


In Support Of Independent Business -



Independent Business Is Driven By Passion


There is a different kind passion involved in the independent business. The independent business is a like child of the business owner. She tries hard to make the business, the brand successful. Just like a mother is always on the vigil and takes care of all the needs of her child, the independent business owner takes care of the business sincerely and passionately.


There is no pressure of target. The independent business owner spends all her time in taking care of the business out of love - not out of compulsion. The business owner can take het own time to make the business successful. There will be nobody to breathe on her neck. She is free to fail!


The independent business owner does not need to follow a fixed framework set by any company (franchiser). She can experiment. She can try new things. She is free to think out of the box.


The Case Against Independently Owned Business


When you decide to set up your own business, you commit to work day and night without expecting much profit in the initial years. Today, the world is full of competition. When you come up with a great business idea, you go out and see that there are already hundreds of people who are working on the same idea. You have to toil away for years to see some success.


If you want to start your own business, you have to invest a lot of money. There will be no big brother franchiser to help you. From setting aside capital to buy or manufacture products to maintaining a thorough relationship with the distributors, from setting up the store or office to decorating it - the non-business tasks are huge and you are all alone to complete these tasks.


And then there is bureaucratic red tapism. You have to get license, you have to please the banks so that you can get a loan. You have to bring electricity connection to the store. In the underdeveloped countries, the red tapism is like a disease. There, you also have to deal with local goons when you set up a brand new shop.


Above all, the biggest investment will be your time as you decide to set up an independent business. Are you willing to see less and less of your child's smile at home? Are willing to cut down on spending quality time with your spouse? Because when you start a business - your business becomes your Juliet, Your business becomes your world. After a few years as you count your profit, you also start counting your grey hairs.


Bottomline


A franchise business is an already prepared cake. A business is a combination of dough, cream, fruits, eggs - you have to make a cake out of them. Each of the two business models is rewarding in itself. None of them is lower than the other. If you ask me, I will first start with a franchise business so that I have time for other activities. Then as I become old, I will try my luck in setting up an independent business. If I succeed, I can pass the mantle on to my daughter. If I fail, it will be a great learning experience for me and my daughter. Win-win.






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