Business

Start your own business or buy a franchise: Which is better?

WRITTEN BY
01/17/24
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Fact Box

  • World Population Review found that the five best countries to start a business in 2023 are all found in Asia with Thailand ranking as number 1. However, in China, “Beijing is one of just two cities in the entire world in which someone can start a business with absolutely no fees.” 
  • Statista defines ‘franchising’ as “a business concept where a franchisee is contractually permitted to use the franchisor’s ideas and business model.” As of September 2023, around 790,500 franchises exist inside the US alone.
  • The most expensive start-up businesses are hotels and restaurants, requiring about $125,000 to start, with the cheapest start-up business being janitorial support or administrative services, typically requiring about $11,000 to start.
  • The most expensive franchise to purchase is Culver’s restaurant, requiring an investment of anywhere between $2,349,000 to $5,356,000. KFC and Denny’s come in second and third place ranging between $1-3 million to own and operate. 
  • As of December 2022, Forbes reports there are around 33.2 US small businesses employing nearly 47% of all US employees.

Luis (Buy a franchise)

If a person's main goal is to generate as much income as possible, there are many reasons why buying a franchise is a better option than creating your own business. Opening a franchised business that belongs to a pre-existing product and consumer base guarantees more earnings, as the product already has a solid presence in the market and only needs to do a little work to create new popularity among clients or users from the ground up.

Likewise, buying a franchise is better because you'll have an established brand and reputation, which is always a valuable asset in building trust and attracting more customers, saving you plenty of money and time on advertising and marketing efforts. Franchising, while generally more expensive on the front end, provides the franchisee the advantage of facing fewer risks in the long run, as the business has already proven profitable in many other locations, having laid the groundwork for success.

This provided pathway is primarily due to the 'Franchise Rule,' which legally requires franchisors to provide in-depth training and support and to 'disclose key operating information to prospective franchisees,' which significantly helps new business owners navigate the numerous difficulties of starting and running a business properly, especially in its first few years. Creating your own business means you're generally on your own, which increases the chances of failing as no specific model for success is provided. It's better to enter the marketplace with a reliable business model tested in numerous ways and areas and refined when needed.

While it's understandable why many people want to navigate the exciting challenge and freedom of creating their own original businesses, buying a franchise is simply the safest move. It might be less thrilling but has more chances of increasing one's earnings. 


Mark (Start Your Own Business)

Starting your own business is the optimal choice when compared to buying an expensive franchise. Owning your own business allows you to generate a brand new brand, set internal profit goals, and establish your own unique protocol, such as company mission, employee culture, and conduct. Being the owner of a unique business allows one to determine and establish their own path to achieving the business's set goals. Buying a franchise comes with demanding, pre-existing rules, along with a branded mission statement. It doesn't give you the autonomy to create your own brand and identity, as owning and running a unique business gives you the type of creative freedom that can give birth to something incomparable in the marketplace. 

In some cases, with wildly successful startups, one's business could potentially blossom into a new franchise as the product or service generates enough popularity and demand in the marketplace that it behooves the owner to expand to the point of franchising, thus expanding its reach beyond just the local area. But starting out with a franchise removes the opportunity for original growth. Startups allow owners to identify and appeal to their specific or unique customer base rather than those of an already established generic entity. A startup business is an investment in not only a brand and a product but in yourself, your own ideas, product or service, and your team.

Getting a franchise up and running is a daunting task, as franchises also come with fees and royalties that simply aren't a factor when starting your own business. Decisively, when opening your startup, you retain 100% of the equity and profits made. If starting a business is comparable to owning a house, buying a franchise is like renting a home. You will continue to work for someone instead of being your own CEO, which completely defeats the purpose of entrepreneurship.

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