Don Daszkowski, Founder and CEO, IFPG

Franchise or Startup, Which is Better?

If you’re wondering if investing in a franchise is a better option than starting a business from scratch, there really is no clear-cut answer. It really depends on who you are and what you want. In a way, comparing a franchise to a startup is like comparing oranges to apples. Yes, they both involve business ownership, but that’s where the similarities end. There are a lot of factors that could make either option a more attractive choice for the right type of person.

Two of the major differences include the time and effort it takes to open for business and the amount of control you’ll have once you’re up and running. So, how will you know which one is for you? Here, we ask some questions to help you decide.

How much risk are you willing to take?

One of the main reasons people seek franchise ownership is because it’s less risky than starting a business from scratch. A franchised business has already been proven in other markets. As a prospective franchisee, you can do your due diligence to find out what you’re getting into. You can read the financials, talk to other franchise owners and weigh the pros and cons before you ever get started. And depending on the brand, you can talk to customers or even visit a few locations and experience the business first-hand. You can taste the food, workout at the gym or use the service. Of course, there is still risk with any franchise investment, but it’s much less. A startup is a new business that no one has ever heard of, been to, or has been proven successful. You can only take an educated guess on how the business might perform. Exciting for sure, but more risky.

How much risk are you willing to take? How much work are you willing to put in?

With a startup business, there are many more unknowns and things to do before you even open your doors. You will have to start everything from ground zero including the market research, branding, creating the business model, strategic planning, and so much more. These aren’t negatives necessarily, but they do require a focused effort and lots of resources. Some people prefer to put in that extra work to have a business that’s truly unique and in line with their own vision. But others don’t necessarily have a vision, and simply want to run a solid business.

Of course you have to pay for it with a franchise fee, which can be quite expensive— upwards of $35k or more. But many, many people see the value in that one-time payment.

Can you follow a system?

Following the franchisor’s system is an essential part of franchise ownership. Noncompliance is the reason many franchisees fail. If you can’t comply, then franchising is simply not for you. Think about it, the franchisor already went through all the hard work, made the mistakes and refined the system. All you have to do is follow that proven system, so why wouldn’t you? Not only is it foolish to disregard a franchisor’s model, but it could also get you kicked out of the system. Imagine, for example, if a McDonald’s franchisee decided to change the iconic Golden Arches to green or changed the name of the Happy Meal? It simply doesn’t work. Consistency is the key to branding and a franchise system’s success.

Of course, franchisees can make suggestions to franchisors, and often, many of those suggestions come to fruition. But any change has to happen at the franchisor level or the brand is compromised.

“With franchising, all that work has already been done for you by the franchisor. You walk right into a turnkey business.”

Do you want to be part of a community or go solo?

Being part of a community is one of the best parts of joining a franchise. Franchisees in the same system can call on each other to share best practices and ask for advice. It’s a truly unique relationship. And, all good franchisors offer ongoing support. With a franchise, you get a corporate team behind you who is constantly looking for ways to improve the business model with investments in technology, ongoing training, and support. During COVID, franchisors helped their franchisees in many ways, including navigating the government’s funding programs and altering their business model to accommodate the new normal. While independent business owners had to go it alone through the pandemic, franchisees had support and guidance from their franchisor’s corporate team.

Everyone is different. To some, the thought of starting a business from scratch is terrifying, while others wouldn’t have it any other way. Some folks welcome the support and structure of a franchise system, and others find it limiting. It all depends on who you are. There is no right answer. For some, investing in a franchise is a better option, for others, starting a business from scratch is the best way to go. But one thing is for sure for everyone considering business ownership: it’s a big move either way. Make sure you do your due diligence. If you want to know more about franchise ownership, you can seek the help of a Certified Franchise Consultant who can help you determine which path is best for you. You can also do internet research, visit trade shows and keep updated with franchise news platforms like www.franchisewire.com where you can read franchisee success stories, learn about franchise brands and get the latest franchise industry news.