There are many decisions to be made when establishing your own business. If you’re still in the initial stages, one key decision is whether investing in a franchise or your own startup is right for you.
There are pros and cons to both, so you must determine which aspects are most important to you and your business vision. Here, we compare the qualities of franchising and independent businesses to help you narrow it down.
The Pros of Choosing a Franchise
Many industries work well within the franchise model, from fast food restaurants and coffee franchises to real estate and business services.
A franchise is an established brand that allows individuals to operate under its name, providing the rights to its trademarks, products and branding. The individual franchisees own their businesses, but operate within a franchise agreement and pay royalties.
There are several key benefits to not going it alone.
Proven Business Model
One of the primary benefits of investing in a franchise rather than starting from scratch is that you can be confident that the business model works and is profitable. Franchisors have a wealth of experience, not only with fine-tuning their business model and market position, but also when working with franchisees to transfer this knowledge and success. As a franchisee, you get access to proven systems, products and expertise from the very start.
Operating under the name of an established, well-known brand provides an in-built customer base, meaning you don’t have to slowly build up a reputation – that work is already done, and you can focus on what makes your store unique.
Robust Support System
When you join a franchise, you get a direct line to business experts who are on hand to support your growth and help navigate problems. Running a business comes with a range of challenges, which are much easier to tackle when you have people in your corner who are just as dedicated to your success as you are.
The kind of support provided will depend on the industry and franchisor, but it will often include things like site procurement, location setup and design, help with suppliers, operations or admin support, training and marketing – all the essentials for setting up a thriving business.
Higher Chance of Success
Because of the in-built customer base, brand recognition, a tried-and-tested model and comprehensive support, franchises generally have a higher success rate than independent businesses.
As well as being more successful in the long run, franchises can also see a much quicker path to profitability. A 2024 survey published by the British Franchise Association states that the commercial failure rate of franchises is just 0.5%, while 50% of startups fail within the first 3-5 years.
Opportunities For Growth
Franchising also provides more abundant growth opportunities, as once you prove yourself with one unit, you can often branch out to explore multi-store franchise agreements, taking advantage of new revenue streams and the chance to develop your reach further.
Many franchisors will help make this process as smooth as possible, supporting you as you expand.
The Cons of Choosing a Franchise
While these benefits make franchising a particularly attractive prospect, there are a few potential cons worth considering before deciding if it is right for you.
- Higher upfront costs – you will have to pay the franchise fee alongside other startup costs.
- Ongoing fees – you will have to pay royalty fees in exchange for using the franchisor’s brand.
- Less freedom – you will have to operate your business within the parameters set out by the franchise agreement.
The Pros of Choosing an Independent Startup
Some entrepreneurs will prefer to start their own business from scratch; as with franchising, there are several key benefits to doing so.
Independence & Flexibility
With a startup, you can be your own boss in all aspects. With no franchisor or corporate oversight, you can be responsible for all decisions and run your business exactly how you want to.
When you don’t have to adhere to a franchisor’s goals or expectations, you can be more flexible with making changes and trying new things on your own terms.
Total Creative Freedom
As you will not have to follow any brand guidelines, you can also take total control over the identity and feel of your business. This includes having creative freedom when it comes to the design of your store and the products you offer.
You alone will be responsible for building a unique, memorable brand that reflects what you want out of a business.
No Royalties
While there will still be plenty of expenses to consider, you will not have to pay any royalties to a franchisor and can use that money in other areas of the business. However, this also means that you don’t get access to the benefits franchisees get in exchange for royalty payments.
The Cons of Choosing an Independent Startup
Despite these advantages, there are numerous cons that make choosing a startup less desirable.
- Lower success rate – independents are far more likely to fail in their first few years than franchises.
- No support infrastructure – you won’t have a formal support system to help you through issues.
- No brand recognition – you will be starting from scratch in all aspects, including building your brand’s reputation.
- More intensive setup – you will be solely responsible for all aspects of the initial setup, requiring more labour and resources upfront.
- Harder to get funding – startups are seen as higher risk investments, making it less straightforward to secure funding.
Should You Choose a Franchise or a Startup?
Ultimately, the choice comes down to your priorities and business goals.
If you want to make a low-risk investment and benefit from the support of an established brand, franchising is probably the choice for you. If you have a specific creative vision that only you can achieve, starting your own independent business may be more suitable.
Leaning more on the side of franchising? We can help! For more information to help guide your decision, see our article that delves deeper into whether franchising is right for you. Or, download our franchise brochure to find out more about Esquires and how we work.
