You are wanting to start your own business. And are unable to decide between a startup and a franchise. Both come with their own set of pros and cons and before you decide which one to zero in on, it is important to examine & compare both in a little more detail.
The risk factor
Business has changed. Or should one say that the options to do business.Earlier you needed sufficient capital, today we have plenty of platforms where you can sell your idea to people. And get them to fund your venture. Making for a much more level playing field than ever before. Thus a startup is not the risky business proposition that it once was. But what must also be stressed upon is that nine out of ten startup ventures fail. On the other hand market research tells us that 90% of franchise businesses were still operational two years after starting. But as they say statistics do not always tell the whole story.
It’s all about freedom
If you are a serial entrepreneur, then you should not even be reading this. These folks are a different breed altogether. They think out of the box, are not averse to risk taking and treat failures as nothing more than a learning experience. For such individuals a startup is quite clearly the choice. Also running a franchise may not always the bed of roses that it seems from the outside. If your intention behind venturing out on your own is so that you can be your own boss and would like to do things your way a franchise might be rather restrictive. A good many franchisors are control freaks who do not like any kind of meddling around with their brand. Don’t blame them. After all they have spent years in building it.
Better chances of success
Are you someone who is open to experiment or would you rather stick to what is the tried and tested? A franchisee business is what one would categorise broadly as tried and tested. It is a business model that has worked and the franchise already is a name that is already trusted. So when you choose to start a franchise the probability of success goes up by that much more. In a startup you would need to work your way up. Making a name for yourself does not happen overnight and when running a startup be prepared to work long and hard. And pray that some luck comes your way. Lots of it, actually.
There are no free lunches
One big misconception among many is that running a franchise is a lesser burden financially. If a brand is very successful then there will be many wanting to have a share of the pie. And in many such cases, buying & operating such a franchise will surely not come cheap. And while it is true that it helps to have a franchisor who can provide you with the backing and resources to run the show the margin on the returns might not be as high as you would like. This is why you will find that many franchisees are unable to pay back loans taken from financial institutions. The money is coming in but not into your pocket.
In conclusion it must be said that a startup has it’s own benefits. As does a franchise. And the inference that one can draw from the above comparison is that if you have limited finances to begin with it makes far better business sense to start a franchise. For those who have deeper pockets investing in a startup would seem like the best way forward. Be as inventive as you like. In terms of running the business by creating & marketing your product/service. You have all the freedom to do things just what you want. And do business on your terms. And your terms alone.
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