Starting a Business

Franchise vs. Start-up: Which One Works for You?

Here are some pros and cons of each model -- decide which works best for you.
Franchise vs. Start-up: Which One Works for You?
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You are tired of working for someone else and you want to start your own business, but don’t know if you should do it from scratch. Below you can find the pros and cons of franchises and startups, and decide which one works for you.

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Advantages and disadvantages of a franchise

Higher Success Rate: A franchise is a proven system. All franchisees operate under a common system and they are only responsible from their day to day operations. Also, they get trained about the product line, marketing, how to deal with staff and other aspects of their daily activities. Basically, they get an ongoing support for their businesses which brings them success.

Brand Recognition: Franchises bring brand awareness with their names from day one. Therefore, customers will know about your products which will increase your sales. By buying a franchise, you are actually buying a turnkey business that is ready and waiting for you to start.

Related: Use Being Different to Your Competitive Advantage

Fees: There is a fee for buying the franchise and ongoing fees that you need to pay to a franchiser. The entrance fees are usually very high and there are fixed costs every month/year for using the brand name.

No Freedom: You don’t have the freedom to change the product line, the decoration of the store or anything else in a franchise system. It is very restrictive and you need to follow certain rules in order to protect your franchise license.

Advantages and disadvantages of a startup

Innovation and Creativity: Founding a startup needs innovation and creativity. If you are a highly creative person full of different ideas and you want to make these ideas a reality, then, you should definitely start it up.

Professional Freedom and Growth: When you have your own business, you can work anytime you want. Also, depending on your business, you can work anywhere you want. You don’t need to report to other people. This means you have your own professional freedom. Moreover, franchise businesses can grow only up to a certain point but there is no limit to the growth of a startup business.

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Higher Failure Rate: Unfortunately, startups have a higher failure rate compared to franchise businesses. Statistics show that 25 percent of startup businesses fail within their first year, 50 percent of the remaining fail within five years and approximately 30 percent of the remaining last ten years. Therefore, it is very risky to launch a startup but don’t forget that high risk equals high return. If you succeed, you can even be a billionaire!