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Franchising or Launching Your Own Business? Pros and Cons

Considering starting a business? After reading this article, you’ll know what type of business suits you best!

Launching Your Own Company VS. Buying a Franchise

The majority of newcomers to the business world are torn between creating their own business from scratch or buying a franchise. Both variants are lucrative but require spending different amounts of money and time.

Today, we will discuss the advantages and disadvantages of launching your own business vs. buying a franchise.

Buying a Franchise

A franchise is a business entity that operates as part of an established centralized system. A franchise owner is responsible for ensuring the successful operation of the company, hiring employees, monitoring product distribution, and evaluating customer satisfaction. So, let’s talk about the pros and cons of owning a franchise.

Brand Awareness

Launching a business might be a real challenge for inexperienced entrepreneurs. Therefore, getting a franchise helps you avoid registration issues, expenses related to brand promotion, and searching for suppliers. According to David Brond’s article, it takes at least five years to promote a new brand from scratch. Franchising helps you get your business off the ground without investing a lot of time and effort into it. This is an excellent possibility for those who want to earn money as soon as possible.

Also, franchise owners receive step-by-step guidelines on how to establish a business in their region. They can also count on their partners’ financial support.

Lower Chances of Going Bankrupt

A franchise is an established system that functions in several cities, regions, or countries. The mistakes you are likely to make at the initial stage of its implementation are all covered in your guidelines, so there is a slim chance of your franchise failing. A good example can be Starbuck’s case in Milan. In the 1900s, Starbucks, one of the biggest franchise companies at the time, was trying to enter the Italian market. Despite employing a typically American business strategy, Starbucks Italy has become one of the most successful franchises worldwide. Unlike other companies that failed to enter the said country’s market, Starbucks succeeded thanks to its well-structured franchise system. (Read more at CNN.com).

Higher Entrance Fees

Entering a franchise is not free of charge. You should pay higher entrance fees to work under the company’s brand and receive their support. Please, note that this payment does not include any further support from the company – it is a one-time thing.

Also, you will have to pay either fixed or floating annual fees. It depends on the type of contract you sign with a company.

Centralized Decision-Making System

If you are considering getting a franchise, you should be ready to have your hands bound. There is no option to change your line of products or suppliers – all those decisions are made in the central office. You can only deal with managerial matters, such as hiring staff and ensuring customer satisfaction.

Launching Your Own Business

Registering your own company takes more time and effort, but it can bring you more benefits in the long run. Let us consider the main pros and cons of owning a company.

Unlimited Scope of Activities

Owning a company, you are not bound to a specific industry or product. You can also choose from a broad variety of activities. There are a lot of business ideas that require minimum start-up capital and are extremely profitable. For example, you can launch a paper assistance startup and help students receive high grades.

Be Your Own Boss

Having your own business lets you be your own master and put your own ideas into practice. It also allows you to be creative and do anything you want to achieve success.

Being responsible for your company’s success makes you a great leader. You can even start selling franchises!

More Responsibility

Running a company means monitoring its performance, and this is quite a difficult task. A good leader should anticipate the consequences of their decisions and have excellent communication skills to resolve all personnel-related issues.

As a sole proprietor, you are not immune to mistakes. Everybody (including you) can fail and ruin your company’s reputation in a matter of days. Be ready to tackle unexpected challenges at any time, otherwise, you will definitely go bankrupt.

Conclusion

Of course, either one of the two options is better than being an ordinary employee. If you feel inexperienced and require some support with running your business, you’ll be better off buying a franchise. However, if you feel that you can tackle any obstacles and run a company without any outside help, you should definitely consider starting your own business. The choice is yours!