Embarking on a new entrepreneurial journey can be a thrill, but anyone looking to start a new business must decide between three options: starting the business yourself, entering a mutually beneficial relationship with a franchise organization, or buying an existing business.
In the past, a do-it-yourself start-up was one of the only ways to start a business. If you didn’t have prior experience in your desired industry, it was an uphill climb. As with any business venture, the stakes are high. It’s about much more than just building a business, it’s about your dreams, your goals, and the legacy you aim to build.
Fortunately, entrepreneurs today have a choice and many franchise opportunities to choose from. When it comes to making this decision there are pros and cons of owning a franchise vs. a startup business to consider.
Is Investing in a Franchise Better Than Starting Your Own Business?
There are many pros and cons to starting a franchise vs. starting a business on your own. Starting a business from scratch allows you to have full control of all business decisions, overall business plan, marketing, operations and more, but you are starting from the ground floor. With a franchise, much of this is already in place along with strong brand recognition and historical data and systems to help you make decisions.
There are many advantages to investing in a franchise business that make it an attractive option. The entrepreneurial landscape is vast and varied, which means that figuring out which is “better” is ultimately a very personal choice.
Whether you're drawn to the independence of building something from the ground up or enticed by the way a franchise business owner can quickly gain a foothold in a chosen industry or add to an existing portfolio of companies, understanding the pros and cons of both sides can help you determine which option is right for you.
Pros and Cons of a Startup Business
First, let’s examine the pros and cons of starting your own business from scratch.
Pro: You Call all the Shots
The main reason an entrepreneur would choose to start a business on their own is the creativity and freedom it offers. With a startup, how you start and run your own business is completely up to you. Of course, this means that unless you have prior experience running a business or have worked in your chosen industry, you may struggle to formulate and implement a successful business model.
Pro: You Can Let Your Entrepreneurial Spirit Lead
Unlike typical business owners who depend on proven techniques and strategies to succeed, entrepreneurs dive in head-first with the idea that greater risk means greater reward. One example is by offering a new or innovative service or product that has not been tested on the market.
Con: The Numbers Aren’t on Your Side
On the other hand, not all businesses are able to survive. According to an article by Forbes, 90% of startups fail. If that percentage shocks you, remember that with a startup, your first few years are filled with trial and error.
New businesses can survive only so many costly mistakes before being forced to shut down. This is why it can be very risky to start your own business unless you have access to research and tactics that have worked in your area for your chosen industry.
Con: You’re on Your Own
Without support and guidance, it’s easy to become overwhelmed and make mistakes that could lead to failure. Think of all the many tasks and decisions a small business owner must complete in any given day, and the systems and processes you’ll need to figure out and implement. Even something small, like not being able to offer secure online payment options for your customers because you didn’t budget for the tech in your business plan, can spell disaster.
Pros and Cons of Owning a Franchise
Now that we’ve explored startups, let’s take a look at the pros and cons of starting a franchise business.
Pro: Freedom with Help
Despite popular belief, franchising offers more freedom than many aspiring entrepreneurs realize. In fact, some of the best franchise opportunities build in a degree of flexibility that many franchise business owners need and want.
For example, Neighborly® offers flexibility within an established system which gives franchise owners an advantage. Owners can take advantage of an established business plan and capitalize on marketing and operational support, while still being their own boss and making many important business decisions. Many existing small business owners pursue franchising when they reach a point of frustration — and a growth plateau. Those who purchase a franchise are investing in a relationship based on mutual trust, with a clear path to build and grow their business.
The difference between an independent business and a franchise is that it’s more than just the owner that’s invested in success. A franchisor is also motivated by the success of the individual.
With the franchisor’s corporate team and network, an owner can learn from other owners’ success and avoid potential mistakes with open communication. Networking events within the individual brands and with the franchisor allows franchise owners to speak and connect locally and nationally both within and beyond their brand.
Pro: Planned Growth for New and Experienced Owners Alike
Some of the most valuable benefits of investing in a franchise opportunity: an established business model and the ability to connect with other experienced franchisees. It is hard to overstate just how much of a difference these two things can make for new business owners.
Whether growth means being a multi-territory or a multi-brand owner, there are many options available over time to push your business to the next level.
Con: You Have to Do the Research
When researching businesses, it’s important to understand that becoming a franchisee is less risky than starting a business from scratch, but every business is unique and carries different risk factors. There are many kinds of franchise companies out there, and no two are alike. These opportunities differ depending on location, budget, industry, and more.
It’s important to do thorough research on any franchise opportunity and to fully evaluate your options. This should include asking yourself and the franchise representative serious questions. This is not the time to be shy or assume anything!
For example, if you can’t clearly answer what type of franchise will best meet your professional goals, it may be time to do some introspection and research to determine what might best fit your lifestyle, personality, and experience.
Con: It Can Be Difficult to Find a Trusted Franchise Company
Not all franchise companies are the same. With the recent surge in the popularity of franchising, there are a lot of options in the marketplace, with a variety of industries making a wide range of promises. The challenge lies in sifting through all these franchise offerings to find one that not only aligns with your vision but also boasts a track record of reliability.
For example, while some franchisors offer support from day one, others may be difficult to reach or lack the experience to answer your questions. By choosing a franchisor that is transparent and honest, you can confidently make a decision on your business ownership future.
Learn How to Be a Franchise Owner
When it all comes down to it, the most important criteria for choosing between a franchise or a small business startup is what feels right for you.
At the same time, becoming a franchise owner may be easier than you think. With Neighborly, you have 19 brand options in North America to choose from and a team that’s ready to help you find the right fit. If you’re exploring franchising, start by downloading our Franchise Ownership Guide to learn more.
