Franchising or Start-up – Which Should You Choose?

So you’re looking to get into business and leave employment? We don’t blame you. When it comes for working for someone else, lots of questions pop into your head whilst you’re there. Some such examples are “why am I working for someone else?”, or “am I even getting paid what I deserve”. Maybe employment is no longer suitable for your personal commitments. So franchising or startup – what is the next step in your career?

Going into business ownership is considered by many as “regaining control”. Simply put, you unlock a lot of flexibility when running your own business, but there are several ways to go about it. You can start up a business from scratch, or you can go down the franchising route. Which should you choose?

Chances are, if you’ve been in employment all of your life, you may not have even heard of franchising or if you have you’re probably not fully briefed on what it actually entails. But some can be surprised to hear there is actually an alternative to starting up a business from scratch, and that is franchising.

There are many benefits of franchising. And there are many benefits associated with starting up from scratch as well. Let’s take a look at the benefits of each.

Starting Up a Business

First up let’s look at the reasons to start up a business from scratch as opposed to investing in a franchise.

Advantages of Starting Up a Business

The first thought about business ownership is starting up from scratch. You come up with a business idea and you mould it to your requirements. This is a fantastic reason because it really gives you full control over the direction of the branding and marketing.

All businesses (and franchises!) have to start somewhere. All franchises will initially start off as a solo business startup, in fact franchisors of big-name brands such as McDonald’s and Dial a Dog Wash probably started off in the position you’re in now!

Owning a business enables you to set aside time for your own commitments. That might be seeing family or picking kids up from school. When you’re in employment, that can often be a struggle – especially for single parents. Owning a business – especially a home based one – offers considerable flexibility. It might not be as flexible if your business is storefront or vehicular based, but employing a workforce can help to overcome these challenges and achieve flexibility.

Finally once you have the business in place, the future is yours to control. Maybe you wish to sell the business, or franchise it. Maybe you want to recruit franchisees in nearby areas – it can really help boost the brand recognition and help you win more business over your competitors.

Disadvantages of Starting Up a Business from Scratch

The main disadvantage of starting up a business (and a key advantage in franchising) is the support. Do you have any experience at all running a business? Or any experience in any form of managerial role? If the answer is no, starting up alone might come as a struggle. Building a business will come with its share of mistakes. These can be incredibly costly. For example, how are you going to get customers if you’re an online business? Do you know how PPC works and how to optimise your website for SEO? Have you got a business name in mind – has it been trademarked already? There are a lot of things to do when you start up a business to get the initial customer flow.

What about partners and suppliers? If your business involves shipping, do you have suppliers in place for postage and packaging? Head to your nearest post office and you’ll see small/medium size parcel boxes upwards of £3.99. Take in to consideration postage will also be upwards of £3 for a parcel – who is going to spend over £6 for postage and packaging? Oven cleaning – your customers are going to expect a bit more than Mr Muscle. Where are you going to get heavy duty cleaning equipment from? It’s these sorts of things that damage customer experience and reputation. You need wholesale suppliers to provide you with stationery and equipment that beats retail prices. If you’re starting up a van based business, for example mobile coffee, where are you going to get your coffee from? Your milk? Your cups? They need to be cheap otherwise your customers will end up paying your expenses and your business will fall flat on its face.

Starting a business from scratch can often be more expensive than the franchising counterpart, because expensive mistakes have already been made and learnt from. Sure, there’s an upfront investment in franchising, but in the long run it’ll cost more to start up alone that’s for sure. Let’s take a look at franchising.

Buying a Franchise

Now let’s take a look at the reasons for franchising.

Advantages of Buying a Franchise

First up is the range of businesses out there franchising. Ask yourself what you want to operate as a business, and then see if there is a franchised solution out there. From baby movement classes to tuition, coffee van franchises to windscreen repair, oven and gutter cleaning to pet food delivery. So many proven businesses are already out there as a franchise operation – would starting up a business from scratch be reinventing the wheel?

Let’s not forget the full training and support. The franchisor has been there and done that. They’ve made the mistakes you would as if you were starting up alone. Bypass those mistakes with full training and support by the franchisor.

The branding – it works. If a business is franchising, there’s a good chance the business and its pilot franchise have been successful. And as the franchise network grows, so does recognition of the branding and marketing efforts. A key advantage over starting up alone is the marketing potential. Whilst there are ongoing monthly fees associated with buying a franchise, it shouldn’t be taken for granted. These fees contribute to network-wide marketing and growth. Franchisors can invest this marketing fund into national TV advertising, marketing and PPC – to extents which solo businesses could only dream of affording.

Everything is Included

Going back to earlier, franchising includes everything you need. Sure the upfront investment can be daunting, sometimes £20,000 upwards for a simple cleaning franchise. But remember that you’re buying a proven business model. The franchisor has developed the operations manual – a document that outlines the successful running of the business. Starting up a business alone, you won’t have “instructions” on how to make the business a success. The ops manual has everything from marketing guidelines to day-to-day running. The franchise investment covers your startup stock and the time/expense of the franchisor in providing you with complete training. That training covers everything from business management through to your own local marketing and equipment handling (if applicable). None of that would be there if you were starting up alone.

Financial Aspects

Then you’ve got your group purchasing power. Going back to earlier, buying stock and equipment will usually be cheaper within a franchise network. Franchisors will have agreements in place with suppliers, who are more likely to work with franchisors than solo businesses. Of course they would. A network of franchisees use the same supplier in exchange for the best prices possible. Its the same with van based franchises – the franchisor has agreements in place with vehicle leasing companies, franchisees get a good leasing deal in exchange for using them as a supplier.

Thanks to the better success rate of franchises compared to starting up alone, many high-street banks favour franchising and can lend up to 70% of the franchise investment. You’re more likely to get approved for finance if you’re investing in a franchise than starting up alone.

Disadvantages of Investing in a Franchise

Whilst franchising up until this point may seem like the perfect solution, it’s not for everyone. You’ll still have guidelines you need to follow as a franchisee. It’s for the best, but for some people the restrictions aren’t for them. Despite being a proven business, some people do feel the need to push the boundaries. So if you want complete freedom, go start up a business from scratch. But beware, a proven brand that’s recognised is more likely to be successful.

Obviously the ongoing monthly fees can be off-putting as well. Usually a fixed percentage of your turnover, with franchising you can’t “keep all that you earn”. Down the route of being a sole trader you can keep what you earn and pax tax, or run a company and pay company fees, but with having a franchise there are additional expenses. But those expenses do contribute to the franchisor’s R&D so again, its for the best.

Business V Franchising – In Summary

While starting up a business alone gives you complete control not only of your life but the business and its direction, it also comes with lots of disadvantages. Franchising offers a route to this business ownership through provision of a proven brand and business model. Both self-employment choices come with their own advantages and disadvantages. Both can unlock unlimited earning potential – after all, work as much as you want (depending on the type of business), the below table summarises the benefits of each.

Alternatives to Startups and Investing in a Franchise

If you’re wishing to buy an established business, there are of course options out there for buying existing businesses for sale UK. Maybe it’s a franchise resale or a bespoke business, buying an already established business has its benefits. You’ve got an existing customer base / client list, the brand is already out there and has a reputation. As with franchising, carry out your due diligence and look into the market before going down either of the 3 routes we’ve discussed (startup, franchising and existing business).

It’s important to remember that you’ll only be successful if you make every effort to be so. One of the main reasons for failure is not having the drive, the ambition to be successful. If you can’t spare the time to lift the business off the ground, you may as well stay in employment. Whatever business or franchise you choose, it will need complete commitment especially in the early stages. Later on you may be able to take a more hands-off approach, but as with everything in life, the more you put in the more you’ll get out.