Franchise Vs Individual Start-Up Business
Franchise Vs Individual Start-Up Business
There are differences between the two types of ventures. Before individuals make a decision, they should do thorough research about the two distinct business opportunities.
Franchise and Start-up: The Differences
1. Possibility of Failure
Every business comes with the possibility of failure. Owners can give their best effort and have optimism about their venture. Yet entrepreneurs must accept the reality that there can be failures.
Owners should remember that businesses are affected by many factors including outside influences. Most franchises succeed but certain franchisees will meet with failure. As well, a start-up business can succeed or fail but more start-up businesses fail than franchises.
Of course, success and failure rates vary from franchise to franchise. Only five or ten per cent of some franchises experience failure. Yet other franchises can have much higher failure rates. On the average, however, more than three quarters of franchises are still surviving after the first five years.
2. Other Businesses
Obviously, every entrepreneur will experience competition. A franchisee, however, has the support of a franchisor and the processes, systems, and methodologies of the franchise. Independent business owners will be working on their own power and cannot benefit from the backup of a powerful system like a franchise.
Actually, an independent owner might even have to compete against a franchise. Individual start-ups can find themselves up against a strong opponent - a franchise with several members. It is possible for a start-up business to compete against a franchise - if they have considerable resources in capital and a development team.
3. Expertise and Experience
When buyers purchase a franchise, they are also getting a proven system organized by a knowledgeable and experienced team. Franchisees get direction from franchisors but start-up owners are left to their own devices. If an independent owner has no experience, the business cannot reflect that expertise.
Of course, inexperienced owners can learn and grow in a business. Yet most likely, an owner without experience will make more mistakes than a person (like a franchisor) with extensive knowledge in the area. Mistakes in business cost money.
4. Finances
Start-up costs can be phenomenal for any business. As well, administration costs, workers' wages, building maintenance, and general business operations will be continuous expenses. An individual start-up owner has to find theinitial capital and the necessary funds to be able to run the business.
On the other hand, franchisees have to invest substantial capital in their businesses. In addition, franchisees have to pay monthly royalty fees. Yet a franchise owner is buying into a proven business. The franchisor can also help with certain challenges throughout the life of the business.
5. Risk
Franchisees mitigate their risks because they have the franchisor behind them. Although business is synonymous with an element of risk, it is wise to choose the venture with the least risk. Franchising carries less risk than an individual start-up business.
Richard is the former CEO and President of FocalPoint International - a business coaching and development franchise. He is a consummate leader who produces spectacular results through bringing out the best in people and inspiring them with his passion, vision, and strategy. Richard is known to successful franchisees as - My Franchise Mentor.
My Franchise Mentor
http://www.myfranchisementors.com
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