Before buying a business, one of the questions which every person asks themselves is whether it will be better to buy a franchise or start their own business from scratch. Here’s the fundamental difference between both types of businesses. When one buys a franchise they get to run a business following the template of a business that already exists. When one starts an independent business, they get to run with their original idea. These fundamental differences should inform one’s decision of buying a franchise or starting their own business. The more specific differences between a franchise and an independent business based on the fundamental difference.
Regulations
When one buys a franchise, they agree to follow specific guidelines on how to run the business. As a franchisee, one is expected to follow the regulations about running the business to the latter. On the other hand, when one starts an independent business, they get to run the business according to guidelines and regulations which they developed.
Thus, if becoming one’s own boss and running a business based on one’s own idea is the main motivation behind starting a business, starting an independent business may be the best way to go.
Brand Recognition
Franchises are bought from an existing business that most likely has a notable customer base. Thus, when one buys a franchise instead of starting a business from scratch, they get to benefit from the recognition the brand already has. When one buys a franchise, they are less likely to struggle through the initial phase of getting customers to trust them. Customers already trust the brand and are more likely to trust them.
Starting an independent business comes with the task of building a customer base from the scratch which would take longer. If the goal with the business is to build a customer base in a shorter period while following established regulations, buying a franchise is more feasible. It is important to add that if one puts in the right efforts into an independent business, they could also build a customer base in good timing.
Finances
Buying a franchise comes with extra financial responsibilities such as royalties which should be considered before the decision is made. Franchisees are expected to pay royalties, as per the terms and conditions of the franchise, and this extra financial commitment may not be healthy for the business.
When one starts an independent business, they are not pressured by the extra financial commitment and could make certain decisions about their finances. It is thus important to consider the financial implications of buying a franchise instead of starting an independent business and vice versa.
Market Resources
When a person buys a franchise, especially if they are first-time business owners, they get to benefit from available operational resources such as supplier information and can benefit from existing networks.
On the other hand, starting a business from scratch involves learning the ropes if proper networks had not been created. The available operational resources may influence the success of the business.
In deciding whether to buy a franchise or start an independent business, it is important to weigh the pros and cons of the most critical elements of the business.
