A lot of future entrepreneurs eventually stumble upon the dilemma of whether it is more worth it for them to start their own (original) business or buy a franchise business.
While starting an original business gives you more room for creativity and the challenge of developing your own brand, it is widely believed that a franchise business tends to be a less risky endeavor. This is because buying a franchise from a business directory such as Franchise Search Engine offers some warrantied and safety-oriented advantages.
Still, are business franchises really less risky? Let’s find out!
1. The statistics are in your favor
From the very start, it is important to bring up the topic of statistics. Generally speaking, the majority of studies prove that business franchises are less likely to fail than original businesses.
New businesses have a low chance of making it past their first five years in business (even though the myth of this number is 95 percent has long been debunked).
The difference between new businesses and franchises lies in the fact that franchises are business models that have already been tested in the real world and have proven to work.
For example, if you are interested in investing in a home improvement franchise, you’ll be happy to hear that most franchises offer outstanding training and support. This is a big win because it means you’ve got the help, answers, and mentoring in place to act as a safety net at every stage of your journey.
2. A tested business model
Renowned Prussian general Helmut von Moltke once said that no battle plan ever survives the enemy’s first contact. The same goes for a business model.
As a business, you will start developing it during the business plan development stage. However, you won’t know whether it is viable or not until you try to execute it.
When buying a franchise business, you will have a far better idea of whether this is safe or not. Why?
Well, because someone else tried it out somewhere and it worked. If it didn’t, you wouldn’t even hear of the franchise business in question, to begin with.
3. Fundraising is easier
The biggest challenge with finding investors lies in the fact that your business model and your business ideas are not battle-tested. Why is this such an issue?
Well, because you are asking people to commit to your cause financially, without being able to guarantee that it will pay off. Even banks will ask to see your business plan and your financial projections for safety risks before approving a business loan.
With a franchise business, you have something a tad more solid to offer to all of these parties. It may not sound as much, but it does make a difference.
4. You don’t start from scratch
Perhaps the single most significant advantage of buying a franchise business lies in the fact that you don’t start from scratch. You inherit a brand name, which is already a huge starting bonus.
Second, you get some pointers (or even rules) on how the place needs to look and how your staff needs to behave. Apart from this, some franchisors will also put you in touch with their suppliers, which is a bigger boost than you know it to be.
Why? Well, because a major franchise negotiating with a supplier has a lot more leverage than a local, family business.
5. Professional assistance
Speaking of assistance that you can hope for from the franchisor, it is inevitable to mention the importance of personal assistance in terms of starting out and training your staff. The majority of business franchises have certain standards in regard to customer service.
In order not to risk a scenario where your franchise business tarnishes that reputation, they will usually send professional trainers to help out with this. Other than this, they might send some experts to help you execute their business model.
6. Your own territory
One of the scariest things that can happen to a new business is a scenario where they suddenly find themselves in a situation where they have to compete with a major brand or a franchise. Why? Well, for many reasons (most of them having a place on this list).
However, when you buy a franchise business, you will get the right to operate under that brand name on a certain territory. This means that other representatives of that same brand can’t just pop up in your neighborhood.
Sure, other major brands can still open their business franchises in the vicinity, but you still get fewer major players to worry about.
7. Checking how others are doing
Previously, we’ve talked about your inability to test your business model in the real world before actually launching. Well, with a franchise business, you can actually learn from the successes and failures of others, which is far safer.
Was there a certain business franchise in your area before? Did it fail? If it did, why did it fail? Do you still want to do this? What are you going to do differently? Has anything changed since then?
Just by finding an answer to these several questions, you will walk into the business world with far greater certainty.
8. Simpler marketing
The issue of marketing and branding is quite terrifying for a lot of new business owners. This is why they prefer to stick with a franchise business.
You see, with a business franchise, you already get a logo, a slogan, a brand name, and more. You also benefit from already existing levels of brand awareness and brand recognition. Keep in mind, though, that there are certain exceptions to this rule.
First of all, trademarks are regional. This is why Burger King has to go under the name of Hungry Jack’s in Australia. These instances are quite numerous, and you might be forced to follow this same pattern.
9. Looking past the profits
When getting aligned with a certain franchise business, you need to think about more than profit opportunities.
Namely, having someone with matching values and corporate culture may make collaboration a lot easier for everyone. Also, it may help you with any potential moral dilemmas.
If, for instance, you are holding a certain cause close to heart, it might be a good idea to inquire about their stance on the issue. For instance, as a person with a high level of environmental awareness, what you want is to find a green brand.
10. Focusing on good governance
Lastly, you need to learn how to focus on good governance in order to avoid a scenario where you accuse an entire business model because of your own shortcomings. The right collaboration between a franchisor and a franchisee depends on three crucial factors – transparency, accountability, and security.
Only after tending to these three pivotal issues can you find yourself in a scenario where you are allowed to pass judgment on the system as a whole.
Think about it; there is a reason why this model works for some and fails for others. Your own governance is what determines which category your business will fall under.
In conclusion: Buy a franchise business for high profit
At the end of the day, it seems like all odds are stacked in favor of actually buying a franchise business; however, this doesn’t make this investment safe – it only makes it safer.
It is still a business, and there is no 100 percent fool-proof way of making money. If there were, everyone would be abusing it until it stopped being financially viable.
Also, just buying a franchise business is clearly not enough. You also need to find the business franchise belonging to an industry that you understand and are invested in.
It would be best if you also found a business model that you believe will work in your own area. Still, all these considerations are more than worth taking.
I, Isaac Brunt, am an experienced business writer and franchising consultant. Driven by Passion and Professionalism, I take pride in providing the best research and articles possible. In addition to my writing, helping businesses grow their reach by finding them the best franchising opportunity gives me the energy to push forward. After so many years of working in the industry, my passion for my work still grows.
