Franchise vs Independent Business – Which is Best for You?

date icon 4 minutes to read date icon 5th May, 2022

Becoming your own boss is a dream for many people who’d like to escape the rat race and venture out to make a living on their own. With this decision comes the very important question of which business model you will go for. Will you choose a franchise vs an independent business? Before you answer this question, it’s crucial to look at both sides of the coin. What are some of the advantages and disadvantages of either one and which one sounds most appealing and reasonable to you? To answer these questions, let’s take a look below.

Buying an existing business: advantages and disadvantages

Let’s start with independent businesses. Here, you’ve got two main options. The first is buying into a business and the second is to start a business from the ground up. Here’s what you can expect:

Personal autonomy: being your own boss and making your own decisions is one of the independent business owner opportunities. Why? Because you won’t be tied to anyone else and your results will be a direct outcome of the effort you put into your business. The more you grow, the more you can personally benefit. And you do not have to share profits, unless you’re in a partnership. Ownership will be within your control and domain entirely, making it one of the advantages of buying an existing business. You will also have more freedom to sell your business at a later stage if you wish to retire or pursue a different career path.

Development requirements: when it comes to the requirements for creating a startup, these can seem daunting to some individuals. For example, you’ll have to start out by doing market research and evaluating your competitors to determine the demand for your product or service on the market, what prices you’ll charge, what location you’ll offer these from and more. In addition to this, you’ll have to create a detailed business plan that contains every element of your business, which you’ll present to potential investors.

New ideas: when it comes to the question “what is one of the advantages of buying an existing business,” perhaps the most important answer is the freedom to implement new ideas. These can relate to improving your offering, providing greater deals, offering a more customised customer service, what you do with your revenue (whether you reinvest it to scale up or something else) and more. 

Financing and cost: one of the disadvantages of buying an independent business or starting a new one is the cost and financing involved. With the cost, it’s usually higher than a franchise because you have to invest in absolutely everything yourself. There are no pre-existing systems you can rely on and you have to build these for yourself from the ground up. In addition, financing for these businesses can be harder to come by. The reason for this is that investors or potential lenders such as banks will evaluate your business plan against the industry backdrop of the fact that a high percentage of startups fail in the first few years of operations. 

Buying an established franchise

If you are also considering whether you should buy a franchise business, you’ll want to carefully consider what you get with such a package and this type of partnership. Let’s take an overview of the most important points below:

Branding: working under the umbrella of a well-known brand means that there’s no need to spend years building your brand name and reputation, which can be damaged with a single incident that may be hard for independents to recover from. Instead, you’ll be able to take advantage of the parent company’s reputation and industry exposure along with an existing customer base.

Marketing and advertising: independents who start out on their own typically spend a large chunk of their budgets on marketing and advertising in order to give the business brand exposure and get more clients. However, with a franchise, you’ve not only got the benefit of an established brand behind you, but you’ll also be able to take advantage of the consistency and availability of marketing and advertising materials and resources that your franchisor will provide you with. These can range from flyers and leaflets to web pages, social media support and more. 

Tried-and-tested methods: if you’re looking for what is an advantage of buying a franchise, possibly the greatest response would be the tried-and-tested business methods of the franchisor. Their business model has stood the test of time and it has remained profitable and performed well over a number of years, in different territories and locations. This is a huge plus when it comes to franchising. 

Operational resources: your operational resources will either be sourced for you by the parent franchisor or you will be able to acquire them at much more affordable rates due to pre-established relationships with supply vendors. Further to this, you’ll be able to acquire financing for your franchise business much more easily than a startup would because of their proven rates of success. Finally, but not the least is the fact that the initial fee or franchise cost can be as affordable as you want it to be. There are so many franchise types to choose from to suit your needs and it’s simply a matter of finding the right fit to suit your budget. 

Conclusion

To wrap things up, it’s important to look at the success rate of both business models – independent startups and franchises – to make a more informed decision. Of course, there are several other factors to take into consideration such as the brand, marketing and advertising, an existing and loyal customer base and so much more. Making the decision can seem like a daunting task but after weighing up what each one offers, you can make the right choice for yourself.