What is franchise?
Franchising is simply a method for expanding business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support.
Advantages and disadvantages of a franchise:
Higher Success Rate: A franchise is a proven system. All franchisees operate under a common system and they are only responsible for their day to day operations. Also, they get trained about the product line, marketing, how to deal with staff and other aspects of their daily activities. Basically, they get ongoing support for their businesses which bring them success.
Brand Recognition: Franchises bring brand awareness with their names from day one. Therefore, customers will know about your products which will increase your sales. By buying a franchise, you are actually buying a turnkey business that is ready and waiting for you to start.
Fees: There is a fee for buying the franchise and ongoing fees that you need to pay to a franchiser. The entrance fees are usually very high and there are fixed costs every month/year for using the brand name.
No Freedom: You don’t have the freedom to change the product line, store decoration or anything in a franchise system. It is very restrictive and you need to follow certain rules in order to protect your franchise license.
Advantages and disadvantages of a startup:
Innovation and Creativity: Founding a startup needs innovation and creativity. If you are a highly creative person full of different ideas and you want to make these ideas a reality, then, you should definitely start it up.
Professional Freedom and Growth: When you have your own business, you can work anytime you want. Also, depending on your business, you can work anywhere you want. You don’t need to report to other people. This means you have your own professional freedom. Moreover, franchise businesses can grow only up to a certain point but there is no limit to the growth of a startup business.
Higher Failure Rate: Unfortunately, startups have a higher failure rate compared to franchise businesses. Statistics show that 25 percent of startup businesses fail within their first year, 50 percent of the remaining fail within five years and approximately 30 percent of the remaining last ten years. Therefore, it is very risky to launch a startup but don’t forget that high risk equals high return. If you succeed, you can even be a billionaire!
(Franchise Vs New Business)