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Franchising vs. Independent Business Ownership

Franchising vs. Independent Business Ownership

  • 14 Mar 2016
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It’s important to examine the benefits and drawbacks of both routes to business success – franchising and independent ownership – to consider which pathway may be the right fit for your unique goals. To start the conversation, let’s shed light on some of the differences between independent business ownership and business ownership through franchising to help you decide with path is right for you.

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Business Structure: When an aspiring entrepreneur takes the route of independent ownership, they have the ability to call all of the shots. They’re in charge of creating and monitoring inventory, services, strategy, hours, marketing etc. When looking at franchise business ownership, the franchisor largely makes the larger decisions. Franchisees are truly never in their business alone and have someone to turn to for assistance and guidance. In franchising, everything is tested and proven to work, and with an independent model, the owner is free to experiment and develop his or her own strategies. Both models can be successful depending on the aspiring business owner’s personality and work style.

Total Investment: When looking at opening a franchise business, the franchisor typically plays a large role in helping to get the business up and running. They oftentimes assist with real estate site selection, lease negotiations, vendor discounts, marketing assistance, grand opening support and more. As a payment for this assistance, franchisees oftentimes pay a monthly royalty fee to the franchisor. In an independent business, the business owner chooses how much money they’re willing to put into the business and at what times. The owner can choose to delay expansion or downsize service offerings when money is tight, but because of financial obligation, a franchisee may not have this option. However, it may take an independent business more money to open shop and turn a profit because they don’t have the assistance, experience or expertise of a franchisor.

Marketing and Branding: When a business owner takes the route of franchising, they are investing in an established and probably well-known company, so the brand and service offerings are common knowledge among potential consumers. Franchisors are also able to invest much more money into advertising, marketing and public relations than independent owners, meaning a franchisee has to put in less work to get people to walk through their door. Independent business owners don’t have this same luxury because they don’t have the same amount of resources or recognition from the get-go. They will most likely have to work harder and put more money into building a presence and recognition in their community.

Operational Assets: For some, independent ownership may supply an outlet by which they can creatively manage their business and drive their way toward success. For aspiring entrepreneurs that have a business background, independent business ownership can give them more freedom to experiment in their business. For those with less experience or knowledge, the ongoing support that a franchise system provides can be priceless. In franchising, the franchisor only succeeds if their franchisees succeed, so consistent support is essential.

It’s necessary to take of the aspects of business ownership into account to determine if franchising or independent ownership is the right fit for you based on the unique skills, talents and preferences that you bring to the table.

 

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