Starting a business from scratch means developing an identity, creating a brand image, perfecting the product, service, and pricing, and when you’ve done that THEN you can go out and start looking for business.
A franchise, on the other hand is like a business in a box. In many cases, a lot of that initial branding and identity creation is done. So in one sense, it’s easier to simply go out and start getting customers quickly. It’s not always the perfect solution, though.
Franchising benefits
The strengths of franchising come from the idea that a business has proven successful so it has been systematized and repeated. That results in a shorter time between initial start up and income generation. With a “from scratch” business, you’d be trying to develop this on your own over a longer period of time.
Franchising also gives you instant recognition and often participation in a large (regional or national) marketing campaign. This is another area that you would spend a lot of your time doing in your “from scratch” business.
Because the franchise wants you to do well (then they’ll do well and they’ll keep their good name in the community, too) you can be sure of all kinds of training and support. This might include a national 1-800 number that customers can call (which get routed to you locally when appropriate) or a national website that receives orders or appointments (which also get routed to you locally when appropriate).
Franchises give you the ability – barring uncontrollable market conditions – to likely succeed if you follow the process that’s been established from the beginning.
Franchising costs
Because the likelihood of success can be very good, you can expect a high up-front cost in the form of an initial franchise fee. Then monthly you’ll likely contribute to an advertising pot as well as pay some kind of ongoing fee (often a percentage of gross sales) to the franchisor. The better the track record of success, the higher you can expect the fees to be. Be that as it may, McDonalds and Subway franchises continue to spring up. The costs are high, but so is the potential income.
One cost not considered often is the feeling of satisfaction of business ownership. Depending on how autonomous you are, this feeling could be lost in a franchise situation when you feel like you are simply a manager of an operation and the real decision makers and owners are higher up the corporate food chain. As well, the opportunity to develop your own brand can be lost.
Summary
Want to own a business with a fast “to market” time and a high likelihood of success? You’ll pay a lot for it, but a franchise may be right for you.
Prefer the edge-of-your-seat excitement and creativity in developing your own brand identity? Don’t have a lot of up front capital to spend? A “from scratch” business may be the better choice.
