A No Brainer: Starting Your Own Business Versus a Franchise

 

Let’s imagine some moment in the future. Think of yourself as an established entrepreneur (you are not where you are today). In this picture, you have reached all your personal, financial, and business goals. Someone that has conquered the barriers of business ideas faced today. If you think back to how this success was reached, does a franchise ring a bell? How about an empire of companies you started? I am guessing the latter. I know for myself that is the vision I see. With that in mind, I want to dive into why that is the case, how franchises will not help you reach your ultimate goals as an entrepreneur.

This blog will show you the benefits of creating your own unique business. When comes to creating your own unique business or buying a franchise, there are many aspects you will want to consider. Each has their pros and cons, however, starting your own unique business has significantly more pros than starting a franchise. 

 

Pros of starting your own business:

 

Complete Control

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You have control of everything! If you are a control freak like me, then starting your own unique business is hands down the option. Giving you the freedom to change and control everything from the initial idea, to all the fine details of each process. Whether that is changing your business model to better serve your clients or investing in new innovative technologies, it can be done. As a business owner on the front lines, you will see many things that allow you to act quickly and solve them. For example, if one day as a franchise owner your operational process did not accommodate someone's wants or requests, you may not be able to help them as some franchises keep strict procedures that must be adhered too. When times get tough -- as they always do in business-- you are better able to control where your revenue goes. A franchise must give up a percentage of revenue or profit, which we will discuss further.

 

Full Revenue Control

Full control over your revenue can be a huge benefit when it comes to starting your own unique business. As a franchise, you must give up a percentage of profits or revenues to the head company each year in the form of a franchise fee. In some cases, franchise fees have amassed as high as $250,000 per year.  When you start your own unique business, that money can be invested back into the business to weather the bad times or create growth opportunities.

 

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Ability for Exponential Growth

Another pro of starting your own unique business is the ability for exponential growth. Developing new innovative ways of operating through technology or procedures can also allow for exponential growth. Since you are running the show, you will likely be able to make those decisions that drive the company forward. With a franchise, you are not allowed to implement new technology or operating styles because it is not your decision.

As a unique business owner, you have the power to sell equity in your business to raise money and further invest in your product or service. This cash injection can create the perfect storm for exponential growth too. Or like we mentioned before, the franchise fee that is saved can be invested to aid this growth.

 

Build Stronger Entrepreneurial Skills

You are able to build stronger entrepreneurial skills when you think of a business idea and execute. There are a significant amount of skills you can learn by taking this route. Here are three:

1. The first major skill is the ability to validate your business idea. This is a crucial skill any entrepreneur should possess, as it will allow you to assess market potential for a business idea.

2. Going out and finding who your key audience is, learning about their likes, and dislikes helps you develop market research skills.

3. Choosing the right business model for your lifestyle goals, and building operational, marketing, financial, and customer service procedures.

All three of these skills will be invaluable for an entrepreneur down the road when they are looking to start other businesses.

 

Startup Costs are much lower

When you create your own unique business the startup costs required are (on average) significantly less. Startup businesses can be “bootstrapped” so your costs in the initial years can remain low, before ramping-up into a larger business. With franchises, on average, startup costs can be quite high. With some franchises on the lower end having startup costs totaling $150,000.

The graph below speaks for itself.

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Creating Your Own Franchise System

By taking the necessary steps now and choosing your business model when creating your business idea, you can create a franchise system of your own. Instead of owning a franchise and having to succumb to the head offices decisions, you could potentially be the one who sets the franchise fee, and profits from it.

 

However, I won’t completely discredit franchising. It can be a viable business opportunity, but you do lose some control when it comes to running the business. If you are stuck with coming up with business ideas and are looking for a solution -- which is what we provide at Business Idea Insight -- one way to break this barrier is to dive into entrepreneurship and buy a franchise.

 

So let’s break down some pros of owning your own franchise.

 

Already Setup

The first pro would be that the business is already “setup”. You don’t need to design and create all the hiring, marketing, operational, and supplier procedures. This can be a huge plus if you don’t wish to design these yourselves. To the contrary, there is a lot of missed opportunity when an entrepreneur does not take the time to learn these skills of building procedures.

 

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Already Validated Business Idea

The second pro is the business model is already validated for you. No need to spend time confirming you have a great idea, you can see customers walk in-through the doors of other franchises. This aspect can make or break people’s decisions when choosing a unique business over a franchise. Validating a business idea can take significant time and in some cases, money. Since a franchise is already validated, you can pour that time and effort into executing on an established business model.

 

The cons that exist are all the opposites to the pros of starting your own unique business. Less freedom with procedural changes, higher startup costs, lower chance of exponential business growth, and limited revenue control provides a quick summary of the cons.


With both these pros and cons in mind, I want you to imagine yourself like we did in the beginning, as a successful entrepreneur. Just as before, you have reached your financial and personal goals through the success of your businesses. Now think back to how you reached that success. Was it through the limiting power of franchises? Or did you create a business that now has its own franchise system? For myself, I pictured the second vision. If you ever become discouraged when thinking of business ideas, remember that it will be worth it in the end.


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Mike NesselbeckComment