Assess Your Business Options

Knowledge-centerIndependent business owner or a franchisee?

 
Once you make the decision to start your own business, you need to decide whether you want to be an independent business owner or a franchisee. When people speak of franchises, they are usually referring to business format franchises.  Such a franchise is essentially a business clone. The franchisor has developed a system for reproducing his business (often right down to the last detail).  When you buy a franchise, you rent the franchisor’s trademark and method of doing business.  The method of doing business involves a standardized approach to delivering a product or service. In fact, many franchises are offered as turnkey business opportunities, all you as the franchisee need to do is walk in and turn the key to get the business up and running. Buying a franchise is a popular choice for starting a business because the assumption is that the franchisor is selling business success: he or she has created a successful business, and therefore, the franchise business you buy will automatically be successful, too. This necessarily not be so.  Buying a franchise is also popular because most franchisors offer some degree of ongoing marketing and operational support.  For example, as a franchisee, your business may benefit from the franchisor’s marketing campaigns, or have lower inventory costs because of the franchisor’s suppliers. On the other hand, the degree of ongoing control that some franchisors exert may be excruciating. Anyone considering buying a franchise needs to carefully investigate all aspects of the franchisor – franchisee relationship, as well as the track record of the particular franchise.

 
Options for beginning a business :

  • Start a new business
  • Buy a new franchise
  • Buy an existing franchise

 
Starting a New Business Advantages

  • Usually lower start-up cost
  • Independence and creative freedom
  • Freedom with location and procedures
  • No inherited problems from an existing business

Disadvantages

  • Requires more time and energy
  • High risk of failure
  • Takes longer to become profitable
  • Financing may be more difficult to obtain

 
Buying a New Franchise Advantages

  • Reduced risk of failure
  • Proven methods and products
  • Start-up assistance
  • On-going training and support
  • Local, regional and national advertising
  • Collective purchasing power
  • Research and Development
  • Association and synergy with other franchisees
  • Easier to obtain financing

 
Disadvantages Tangible limitations:

  • Design problems
  • Location problems
  • Merchandise problems

 
Intangible limitations:

  • Customer or employee ill will
  • Pricing problems
  • Inadequate procedures
  • Lease problems
  • Potentially higher costs to buy
  • Legal liability in inheriting lawsuits
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