Is a franchise a good way to start your own business?

There are typically three paths to going into business for yourself: starting a new business, buying a new franchise, or purchasing an existing franchise. Each option carries pros and cons, which we have outlined below.

To summarize, starting your own business can be a more affordable, flexible option, but often requires significantly more effort and carries a higher risk of failure. Purchasing a franchise comes with significant brand and business support from the franchisor, although your costs are generally higher and you cede some operational independence to the franchisor.

Regardless of the option you choose, it will take hard work to find true success. We hope that the information below helps along your path.



PROS AND CONS OF STARTING A NEW BUSINESS:  

Advantages

  • Typically lower start-up cost
  • Independence and creative freedom
  • No inherited problems from an existing business

Disadvantages

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

 

PROS AND CONS OF BUYING A NEW FRANCHISE:

Advantages
 

  • Reduced risk of failure over an independent business
  • 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

  • Higher costs (fees, royalties, supplies)
  • Smaller profit margins
  • Lack of independence and freedom
  • Difficult to achieve redress if franchisor fails to meet obligations
  • A franchisor's problem may become your problem

 

PROS AND CONS OF BUYING AN EXISTING FRANCHISE:

Advantages

  • The business is already up and running
  • Risk and uncertainty are reduced
  • The basic infrastructure is in place:
    • Established location
    • Existing customers and reputation
    • Employees
    • Vendors
    • Policies and procedures
    • Cash flow
    • No start-up period, leading to quicker profitability
    • 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

NEXT STEPS

The International Franchise Association has over 1,400 franchisor members, representing 100 unique business categories, listed on our site.  If you are considering whether or not to go into business for yourself, but not by yourself, we are confident that you will find a number of franchise systems that might be a good fit for you. To begin your search, visit our franchise opportunities section.