If you’ve spent any amount of time looking into business opportunities, then you’ve probably came across franchising. Franchising offers a route to business ownership by investing in an existing brand, a more favourable choice for many – than starting up a business alone. But what about businesses for sale? If you’re looking for a good entry point into the world of business ownership, buying an existing business and buying a franchise are significantly safer than starting up from scratch. But business or franchise – which should you choose? Let’s find out.
Franchises Are a Good Entry Point
First up, if you’re unsure of the concept of franchise, it would definitely be worth checking out our article that covers the basics of franchising and its meaning.
If you’re at square one with owning a business and it’s not something you’ve done before, franchising offers a fantastic entry point. Why? Because you’ll be taught the do’s and don’ts of running a business through franchise training courses. For your initial franchise investment, you should expect to receive comprehensive training and support from the franchisor. This is good for anyone that is considering leaving employment, or has no prior experience of business ownership. You’re less likely to get the one-to-one training and support you need if you were to buy a business for sale.
Because of this training, you’re not entering business ownership half-cocked.
The training and support offered by the franchisor will prove useful and help you to find your feet starting off. And one of the important benefits here, is that unlike a business for sale, that support isn’t going anywhere. In exchange for a monthly fee, you’ll be receiving continued marketing and support including R&D from the franchisor. Your monthly fees contribute to a group marketing pot that is used to help promote the entire franchise network. You don’t get that level of support buying a single unit business for sale.
Businesses For Sale Can Include Franchises
At the risk of sounding bias towards franchising (we are a franchise directory after all), it’s worth emphasising that businesses for sale in the UK can actually include franchises. What you’re after here is something known as franchise resales. Franchise resales offer the best of both worlds – the benefit of a franchisor’s training and ongoing support, plus the benefits of an established business. Franchise resales will be similar to buying a solo business, except you’ll still have the beneficial support offered by the franchise head office. That also includes national marketing as previous discussed, and of course, the proven and widely recognised brand name. More on that next.
Franchises May Be Better Known
Whilst not so true for newer franchise start-ups that are just getting going, but more established franchises will benefit from wider brand recognition. Having that brand power can have a positive effect on finding clients, because consumers and businesses are more likely to use an established business than a local one. And there are many reasons for that, one such reason being cheaper prices. Franchise networks benefit from increased purchasing power – able to buy products and services at a reduced rate compared to individual businesses. Franchisors might partner with various suppliers, their franchisees using that supplier at the suppliers benefit of having plenty of repeat business, all while the supplier in exchange, offers better priced services. Franchisees can then utilise those affordable services to price their own services competitively. Having that brand recognition is one of the best things about franchising.
Businesses For Sale Are Already Established
Although brand recognition is true of franchises, it is also true of businesses for sale. An established business will already have a local presence. It might have a well-ranking website on search engines, and a presence in local magazines. And that’s a benefit of buying a business for sale. Franchises – although the brand is established – you still need to build it up and establish it within your own territory. Franchisors usually provide their franchisees with micro sites or their own territory website altogether. And this will take time to rank. New domains and new pages all take time to rank, and SEO is no exception for franchises. Although franchisors will often include SEO and marketing within their franchise package, a standalone business for sale likely already has all of this in place.
While business opportunities are turnkey and ready to trade straight away, franchises usually aren’t. There are some turnkey franchises out there though. But remember, one of the benefits of franchising is the training and support. If you don’t have the knowledge, you should invest in a franchise rather than an established business.
But Franchises Are Often Cheaper
Although the franchise investment can be anywhere up to a few hundred thousand, many franchises are actually not! Many franchises are available for less than £25,000. If you’re looking to buy a business or a resale, you shouldn’t be expecting to pay less than £100,000.
The reason why franchises are cheaper is they’re essentially kits. You have to put the time and the work in to building them. The franchisor provides you with the equipment, the tools and the knowledge, and you need the determination to assemble it. Kits are always cheaper than the finished product. And when it comes to buying a business, you’re also paying for the hard work and the labour the previous owner has put in.
Businesses For Sale – Gauge The Demand
When investing in a franchise for your specific area, despite being alloted a sizeable territory it’s never really possible to know for certain just how much demand there will actually be. Maybe there are already numerous competitors serving the market and the franchise business isn’t justified. Well, with a business for sale, you’ll have an existing client base and you’ll know what the demand is like before you buy it. With a pre established business, the demand should already exist.
Obviously that’s no reason to write of franchising however, because as we mentioned before, you get group marketing (which can include national TV and campaigns to drive you clients) and purchasing power, both of which any competitors in your area simply wouldn’t be able to afford.
So Which Should You Choose?
By now you probably know that starting up a business alone can be risky, because you need to do everything from scratch. But if you’re looking to get a head start and set up with a proven business model, which should you choose – franchising or business for sale?
Well, if you’re leaving employment and have no experience of business ownership, then you should definitely consider the franchising route. There are many franchise opportunities out there – in fact there are over a thousand. From pet businesses to coffee, cleaning to home based working. You don’t have to wait for the right business for sale to pop up, just explore and find a franchise that works for you. As a new franchisee, you’ll benefit greatly from the franchisor’s training and support. It really does come in useful, and many banks favour franchises too – many can lend up to 70% of the franchise investment. Franchising is also very well supported, with associations like the British Franchise Association, and many regular franchise exhibitions.
But if you’ve got managerial experience and want a business that’s ready to run, franchise resales offer the best of both worlds. A ready to run business, backed by a franchisor with continued training and support. When buying an individual business, you’re stepping into the unknown in a way. And the brand is only really known locally, its not as wider recognised as a franchise were to be.
Both buying a business for sale and buying a franchise require an upfront cost, but franchises are generally more affordable and the break even time should technically be sooner than if you were to pay for a business upfront. So if you’re looking for a business on a budget – maybe something to do on the side of what you do now, definitely go with franchising. If you have business ownership or managerial experience and are looking for new challenge, why not go buy a business. Someone needs to take it on, and the local community will likely depend on it. Money should be rolling in from day one, unlike with a franchise.
Both franchising and businesses for sale are good choices for self employment, and while buying a business has the benefit of income from day one, buying a franchise has the benefit of full training and the franchisor’s support. Franchising is the right way to go if you need a starting point for business ownership, while business for sale is a good choice for an experienced entrepreneur looking for a challenge.
