Is opening a franchise worth than starting a business?
I’ve been working to own a business for some time. I have considered opening a franchise with either McDonalds or a pizza company like Papa Johns. I havent decided… but maybe I should just open my own business? I have a lot of experience in the restaurant industry, as well as some management experience but I’d rather have the safety net of a franchise to help lead the way.
Both paths have their pros and cons. You’re right, there is sort of a ‘safety net’ with a franchise. Most of the time the franchise will set you up with the building, equipment, and supplies. However, every week, a percentage of your sales (maybe 2-3%) needs to get sent back to the company. This goes t pay for things like national advertising, etc. If you start your own restaurant, you’ll need to find everything on your own, but you can officially be your own boss and do things your way!
Starting up a new "mom and pop" type business is statistically very risky. Numerous studies have been conducted on this subject, and the general consensus indicates that 90-95% of new independents fail within two or three years. The steep learning curve that is involved can be a killer all by itself. The few who do succeed in this business model typically have an extremely high level of expertise in their product or service. They’ve "lived it" all their lives.
When it comes to franchising, however, much of the risk is reduced, or even eliminated. Although there are no guarantees, this business model is as close as you’ll come to a guarantee of success. The same studies show that new franchise business startups rarely fail. The reason for this, quite simply, is because the often very long exercise of trial and error has already been done so many times that it’s reached the inevitable point of trying and succeeding. The franchiser has made it through the learning curve and, along the way, has developed the success secrets for that business. Those who fail in franchising almost always were not committed to following the franchiser’s systems. The main reason you buy a franchise is to minimize risk and to set yourself up for success.
Traditionally, in a new startup, independent business, you are almost always operating from a "shoot from the hip" mentality, which can lead to failure. There is no past experience to draw upon, and it becomes challenging to control all aspects of the business.
With a good, successful franchise model, you open yourself up to a deluge of information regarding all aspects of information, including financial assistance, site selection, and a wealth of knowledge from existing franchisees. Also, rapid growth is inevitable with the franchise model, which is only a good thing for a franchisee for many reasons, such as increased name/brand recognition and exposure to national advertising campaigns, which increase sales. Tremendous buying power because of constant expansion is also a major plus.
Of course, the key is to follow the proven system of success, so your creativity can be somewhat lessened. In addition, you will have to pay a franchise fee and an ongoing royality, and your individual ability to make changes to the franchise is reduced dramatically.
To summarize, franchising greatly reduces risk, enables you to follow a proven, successful system, and increases your chances of success in business exponentially.