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Franchise vs Start-Up – What’s Right for You?

September 27, 2017

As a new or prospective business owner, you will have a lot of decision making to get used to. One of the biggest decisions you may encounter is the choice between opening an established franchise business or investing your professional efforts into an independent start-up. As the strengths and weaknesses between these business frameworks have major characteristic differences, it is highly recommended that business owners take the time to understand their own management styles to better predict how they might operate within each.

The experts here at BUILD IT by Design have worked with many franchise systems, start ups and, we have applied our knowledge to create a quick-sheet reference for you to consider when met with the franchise vs start-up dilemma:

FRANCHISE:

 

Strengths:

Safety – Franchise businesses generally come with established credibility as the organization would have operating experience. This results in an established customer base which amplifies the likelihood for success.

Support – Franchise businesses offer tons of support from marketing, training, tech and business advice to help you run your business smoothly.

Instant – “Turn-key Business” mentality equipped with a per-determined store design, product shelf and most importantly, customer loyalty.

Weaknesses:

Contractual Obligations – Predetermined operations can also result in forced suppliers, clash of interest and conflicting ideas. Creative freedom is very limited, and some business campaigns may not be suitable across all locations (e.g., one size marketing strategies)

Risk – In the event of corporate-level scandals, mishaps or public lawsuit, your reputation would be at the hands of the collective franchise.

Fees – Starting costs, alone, can range from $250,000 – $1 million in expenses. In addition to this heavy price tag, the ongoing franchise fees will also collect approximately 6% of revenue!

Recommended for:
– People looking to jump head first into a trusted brand with loyal customers
– Those who like to pay close attention to detail/follow a plan
– People that are more comfortable with established systems than creative control

INDEPENDENT START-UP:

 

Strengths

Creative Freedom – As an independent business owner, you would have full reign in creative decisions, scheduling, suppliers, marketing, etc.

No Franchise Fees – Franchise fees and royalties can eat up a large portion of your revenue. Opting for an independent start-up will put this money back into your pockets where you can invest further into your success.

Be Your Own Boss – Opening an Independent business means that you will be in control of all aspects of your business. Each executive decision will be in your control without any interference from “head office”.

Weaknesses:

Brand Building – Building a brand from scratch can be extremely time consuming. You will need to familiarize yourself with the different methods of marketing (e.g., proximity, mobile, social)

Trial and Error – Learning the ropes of a new business operation may be a challenge for the first few years as the trial and error approach clears out any of the kinks. Unfortunately, these errors may sometimes risk destabilizing the business.

On your Own – Unless you hire professional assistance to help with the different aspects of your business, you will essentially be handling it all on your own. With a 25% fail rate during the first year of a new independent business, you can expect to put in long hard hours when getting started.

Recommended For:
– Those who are not afraid to take risks
– Self-motivated people with great time management
– People who like to be in charge and/or have full creative freedom

Looking to discuss your options with a professional? Contact our BUILD IT by Design team at (905) 696-0486 or info@builditbydesign.ca to plan your future business!

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