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Starting a Franchise or Independent Business, What’s Best for Me?

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Read this Guide on Deciding on Starting a Franchise or Going Solo with an Independent Business

Entrepreneurs and investors looking to open a business are faced with a difficult decision. Should I start a franchise, or work from the ground up with independent business? There are big distinctions between both options which will lead small business owners down very different pathways. Whether you want to open a restaurant or a pet store, eventually you will come to the crossroads.

Before figuring out which route to take, you will need to ask yourself some questions to discern which is your best option.

  • What is your business background?
  • What kind of experience do you have in the industry you are pursuing?
  • Do you work better with support and guidelines or do you have an unshakeable vision of what you want your small business to look like?
  • Do you have viable finances available to start your business?
  • Do you need support and training?
  • What are you passionate about?

Opening a small business is an inherent risk. According to the Bureau of Labor Statistics, less than 20% of businesses started in 1994 are still open. Many state that franchise success rates are higher than independent businesses, but the truth is, the failure rate is the same. Only 66% of small businesses will survive the first two years. An even more bleak statistic is that one-half of total businesses fail in the first year. Avoiding becoming a statistic and establishing a thriving business is contingent on the decisions you make as an owner. The first of these decisions is deciding the route of business you plan on pursuing.

Read through this list of pros and cons to figure out your plan of action.

Creative Control

The area that is arguably the most important aspect of going into business is the operational concepts that establish and build the business. A franchise has developed these operational concepts and proved them in the marketplace. Successful franchises have fine-tuned these operations. Independent business requires prospect small business owners to develop these themselves. For example, if you plan on a retail store you will need to find vendors, design an inventory, and secure a POS system to name a few tasks.

Independent Business

With an independent business, this responsibility is completely your own. The advantage of this is that you have complete creative control. You design your bottom line and you alone are the ultimate deciding factor in every choice that pertains to the future your small business, for good or for worse.

Franchisee

Since you are starting a franchise, the scaffolding of the business is already in place. Many think of this is as buying a business in a box but in actuality, it is much more intricate than this. You will have to follow the guidelines set up by a franchisor—many of these are in place to secure a franchisee’s success.

Finances

Opening a business requires a huge amount of capital. Construction on a storefront, purchasing equipment & inventory, and training a staff are just a few costs that small business owners have to contend with. Each option has initial start-up costs, but where they differ is in the methods of financing and division of funds.

Independent Business

Historically, future independent business owners will have to account for more extraneous spending than franchises. Higher investments costs are due to liabilities and the fact that operational tasks are being done for the first time. For instance, a retailer will have to find vendors for their initial stock order and will not be entitled to group discounts that franchise owners are eligible for. However, having more control allows independent business owners to forestall certain investments. They are not mandated to proceed with expensive construction or purchasing non-essential equipment.

Franchisee

A prospective franchise owner will need to meet financial requirements that the company has in place to ensure success. They will also need to pay a franchise fee and annual royalty fees. Still, franchise business buyers have typically lower investment costs up front. Since the franchise model is perfected, franchisors have configured how to open units in the cost-effective method possible.  This is advantageous.  But in place, the franchisor reserves the right to Experience Level impose enforceable costs like remodeling and timing of construction.

Experience Level

Regardless of the industry, you are venturing toward, you are going to need to have a comprehensive experience level of the market and business tactics necessary to own a thriving business. Your experience plays a huge role in deciding whether opening your own business or starting a franchise.

Independent Business

If your background is within the industry you intend to invest in, then going solo might be a considerable choice. Over the years you have gained insights into how a business operates in this particular market. Essentially, you can cut out the middleman because you are a veteran. You are comfortable being in charge of the creative aspects of the business and can effectively lead a team.

Franchisee

One of the beautiful things about starting a franchise is you can have very limited experience in a field. Learnability goes a long way in franchises. If you can follow a business template and execute a business plan that has been proven to work then you can be a successful franchise owner. You can bring your unique skill set to the table combined with the guidance derived from the franchisor. This will maintain a thorough expertise on your operation.

Brand Recognition

A business’s brand extends beyond logos and company culture. Brand tells the story of the business and helps consumers associatively identify with the product or service. An effective brand for a restaurant will tell customers what their food tastes like, the ethics behind the food cultivation, and creates trust between the restaurant and the customer. Corporate social responsibility (CSR) also pertains to brand. These days consumers engage with brands tactilely because of social media. This means constructing an authentic and well-perceived brand is vital.

Independent Business

Going solo means you have absolutely no brand awareness or loyalty. First, you will have to create a brand. Then you will have to market this brand. This means you need a great idea. Then hiring at least a graphic designer to design a logo, letterhead, etc. Again, since you are creating this you will have the ultimate artistic vision over your brand. Store design is also a major segment of a brand. You will need to compose these elements too.

Franchisee

This is a huge advantage for franchise owners. Before opening doors, consumers already have a brand awareness for the future storefront. This means franchise owners don’t have to spend any time devoted to developing their brand and can focus their efforts toward marketing and other operational projects.

Operational Resources

Depending on the type of business you plan on opening will decide what operational resources you will need. Almost every business needs inventory, staff, POS system, marketing materials, equipment, and a workplace. Whether you are a SaaS developer or a burger joint these items are essential.

Independent Business

Like a start-up, independent business owners will need to build everything themselves. The vantage point to this is having no constraints. You can ‘cookie-cutter’ different resources for your specific needs. For instance, you can choose what scheduling software you want to use with your employees and only pay for the functions you need. The downside to this is it will be time-consuming. There are dozens of tasks that need to be finalized before a grand opening. Each task needs to be foolproof to increase the chances of your business survival.

Franchisee

Owning a franchise isn’t about developing operational resources, it’s about training to use them. A franchisor will provide all the resources you need and usually have proprietary software to assist with scheduling, inventory management, and accounting. You will have these resources at your disposal.

The Bottom Line

The best way to decide is to take an introspective look at yourself. Which route would you profit in? If you’re a DIY person who does not handle following rules, well then you might want to consider doing the independent route. If you excel at taking a concept and utilizing the resources to grow a business, franchising is the right move for you. There is a reason military veterans make talented franchise owners. They have an ability to follow the instructions toward success.

Think long and hard before choosing, and good luck!

 

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The Big 3 of Sustainable Business Growth

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There is a myriad of impeding statistics circulating the business world. According to the small business administration, only half of all new establishments survive five years or more. One-third survive 10 years or more. How do you ensure your business is one of the ones that makes it? Established small businesses, startups, and franchise owners alike need to make adjustments to build a company-wide framework for business growth.

Having a tangible course for long-term success can mean the difference between your business tanking or sustaining the momentum necessary for new heights and better views.

Businesses aren’t trees. You can’t stick them in the ground, sprinkle water, and expect them to grow. It takes an adaptive ethos. The same can be applied for the entrepreneurial spirit. Getting oneself geared for vertical mobility takes a systematic approach.

This article will help business owners grasp their inner entrepreneur and become the leader that will take their business through the course of financial ascension.

Establish Your Value

Market Gaps

Sustainability in the marketplace takes exploring uncharted niches. These are called market gaps. This is the starting point for most traditional businesses to determine if their venture premise is capable of withstanding business growth. Typically, determining a market gap is the antecedent of innovation. For instance, before Jaap Haartsen invented Bluetooth capabilities, the inventor most likely asked himself, how can we make headphones better? Thus one of the most prevalent forms of wireless technology emerged into the market.

Market gaps are not always a commodity of invention. Sometimes it is expanding on an idea that is already proven favorable by consumers. Say you are thinking of opening a retail boutique in an up-and-coming neighborhood. Established local small businesses are already accounting for all consumer demands except designer sunglasses—a market gap emerges. With some research, opening a high-end eyewear store could be a profitable enterprise geared for strong business growth.

Another example is when regional demographics allow for a certain product or service to thrive in a specific micro-economy, or shifting incline in consumer trends occurs. For instance, the pet industry has been spiking in the past few years. But research shows rural areas are not the most ideal location for a pet retail franchise while urban based pet businesses are swelling. This business growth is occurring for a variety of reasons, but the simplest one is that more people are purchasing animals for companionship in cities. As demand grows so will business.

Brand Uniqueness

Corporate executives and the Swedish grandma down the street running the meatball restaurant will tell you, it’s all about standing out. This needs to be quantifiable. What does your business provide that distinguishes itself from the competition?

Grocery stores have been around since the early 20th century, but not every grocery store premise has survived. The Whole Foods brand differentiates itself from the Walmart brand. Whole Foods capitalizes off premiumization while Walmart focuses on competitive pricing. Both stores have individualized a brand concept with customer appeal and unique marketing. The trick is to tell a story with your brand that can be summed up in a sentence or less.

Lasting businesses have an established brand that delineates the narrative of the company’s mission, appeals to consumers, and is widely recognized. Branding is integral to business growth.

Revenue Streams

How does your business make money? Your revenue streams are part of the key indicators for business growth—measurable segments that promote growth. What are your current revenue streams? Is it possible to create new forms of revenue? Of your revenue streams, which one is the most sustainable for long term success?

The most advantageous source of revenue is recurring revenue. Usually, this derives from customer membership. This stream is typically for a continued service, but  differ through sectors involved with this exact source of income. Cellular service providers, gyms, and even pet stores have recurring revenue built into their business concept. The reason this is so critical is that recurring revenue maintains earnings not contingent with marketplace factors.

Businesses looking to expand need to establish areas within their concepts where multiple streams of revenue can boost profits and develop the most lucrative means.

Streamline Methods Aiming for Business Growth

Evaluation

This will take two evaluations. The first one is an introspective look into your business. What needs to be tweaked, altered, or removed? This is general maintenance for your business.  A translation and language services company that is using outdated software that wants to reach global participation is not going to last. A company like this will need to invest in purchasing or developing the technology needed to expedite services and leverage online language education. Tons of failing businesses get caught up the in this process.  Trial-and-error business growth tactics hinder business growth. You will want to make measurable changes timely to avoid wasting time and resources.

The second analysis you will need to complete is monitoring the competition. Chances are competing businesses in your industry segment are excelling in areas where you’re falling short. Take the time to see what other businesses are doing that you should be aware of. This will guide your growth strategy. Some retail stores will send in secret shoppers to rival stores to clue them in on the way competitors are merchandising their store. Have the choices your competitors helped them find success that you failed to see?

Retain Talent

Turnover is one of the biggest snags of business growth. Replacing an employee that makes 10/hour costs the company 16% of an annual salary, according to a CAP study. The same study found that replacing an executive making $100k will cost up to 213% of their annual salary or $213,000. The trick is to find talent and keep them.

Benchmark your employee retention rate with proven strategies. Hire a few ambitious and suited employees and pay them well. The payroll for a half dozen well-equipped and motivated employees that are compensated fairly will offset potential mediocre employee productivity and costs of turnover. For a thriving pet franchise, this means finding a salesperson that can educate customers and drive sales.

Employees are an investment; treat them as such.

Focus on Strengths

The best way to optimize your business is to explore what’s working. Scouring through your overhead is smart, but don’t waste too much time playing accountant. Sometimes developing the strong points of your business will be more beneficial than cutting costs, or improving weaknesses. Overhaul your recent successes and systematize them for business growth.

Skillful Leadership

Business change happens from the top down.

Proverbs like ‘football teams are only as good as it’s quarterback’ or ‘don’t be a captain of a sinking ship’ might appear callow, but there is truth in these aphorisms. If you want to be the Steve Jobs of your business you need to adopt this ideology. You will need to lead your team and employees through the intended business growth agenda. Whether you are local microbrewery, or a drone rental business, you will need to harness the leadership skills to thrive.

Even grassroots startups will need a comprehensive vision to focus the efforts of the company. Great leaders need to be immune to pressure. Roadblocks and obstacles should be viewed as a welcomed challenge, not a pitfall. Business takes finesse and intuition to forecast and implement a wise plan of action to grow dreams into reality.

Imaginative Decision Making

The ability to work through a problem sequentially is the sign of great leadership—problem-solving. The lack of simple problem solving has become so rampant in business, many outsource, or hire special project managers to handle risk minimization. The fewer problems occurring, the easier business growth becomes. The best way to avoid issues is to be predictive. If you can see problems happening in the future, you can take the necessary steps to evade them.

After hits like “The Avengers” and “Guardians of the Galaxy,” many are surprised that the Marvel company filed for bankruptcy in 1996. At the time, the company only dealt in print comic books. But thanks to some clever merging and financial agreements, the company was able to partner in making some of the top grossing films of the past decade. Don’t give up! Failure is not an inevitability.

Do not Fear business Growth; Embrace it!

Many aspects of business are a calculated risk. Just the sheer fact that you are operating a business shows that you have taken the first step in the gamble of entrepreneurialism. This requires a certain amount of open-mindedness. When employees from bottom to top feel marginalized or too discouraged to innovate—this is not good. Employees need to collaborate on ideas and feel camaraderie within the company culture.

Sustaining growth is a communal momentum. Make sure your company culture is an encouraging atmosphere that invites creativity. The brainstorming sessions it will take to get your business into a more lucrative place will be demanding. Model for employees and colleagues how diversity, respect, and ambition are the attributes for pioneering the business realm and how overcoming challenges is the kindling to the fire of business growth.

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