Why do you want to own a business? The answer to this question is important as it can help determine whether it would be better to purchase a franchise or start your own business; the answer you give provides insight into the path you should choose. Remember that franchisees tend to buy franchises because they lack marketable skills. Franchises offer technical training and a business methodology, which is ideal for the individual who lacks a lot of previous business experience; franchisers show you how to run a business. Also remember that owning your own business is more of a lifestyle choice than a method of employment, because of the way the business tends to creep into your personal life. Let us examine some reasons why individuals tend to want to own a business, and compare those needs to different aspects of franchising versus starting your own business.
Franchisees usually end up becoming like employees to the franchiser. If you want to own your own business to be your own boss and have the freedom to make decisions and choices, don’t buy a franchise. Franchisers dictate much of the operational and organizational details of the business, including what to do, when to do it, and how to go about doing it. If you are seeking to exert more personal control over the business, the option of starting your own business may be a better choice.
If you have the technical know-how in your field of interest and in your industry, and if you have an idea that you believe has a lot of future promise and potential, you would be better off starting your own business. Because franchisees tend to buy franchises because they lack marketable skills, franchisees also buy into the idea behind the franchise. If you already have established ideas about what type of business to run and how to run it, a franchise might be redundant or worse, restrictive. Franchises don’t give much opportunity to pursue your own independent ideas.
Franchises tend to be more successful than independent small businesses. If you are seeking financial gain, a franchise may be a better choice than an independent business. Franchises have a failure rate of about 5%, whereas independent entrepreneurs face a failure rate of 30-50%. The truth is, franchises don’t tend to make more money than independent entrepreneurs, but their success rates are enough to balance the scales in their favor. The problem is that you will be paying for those higher success rates through fees paid to the franchiser. But for those without a lot of hands-on business experience, the fees are worth the success.
If you already have a large amount of start up capital in hand, you lack a good amount of previous business experience, and you are looking for something to keep you busy, a franchise may be a good option. Franchisers will hold your hand through the process and well into the future, and with the organizational and operational help, if you can handle the fees easily, franchises can be an excellent business opportunity. Franchises are popular among downsized executives and early retirees because they have the startup capital in hand, but lack experience in the industry.
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