Franchise vs. Startup: What’s Your Entrepreneurial Journey?

Owning your own business can be an exciting, liberating and lucrative experience. But it’s a big change to go from corporate employee to head-honcho, so it’s important to know what you’re getting into before you get started. And it all depends on the kind of business you want to own.

Do you want to launch a startup or invest in a franchise? Sometimes, the best first step is making a pros-and-cons list for each possibility. Here are some thoughts to get you started:

Investing in a Franchise: Pros

You’re Your Own Boss

This is the big draw of venturing into franchise or startup ownership. As long as your business succeeds, you’ll have no one to answer to, no tricky corporate ladder, no unexpected pay cuts or skipped bonuses. It’s the American dream.

Proven Model

A franchise provides business owners with a proven operational concept, which often makes it easier and therefore less risky than a startup. Plus, since you know there’s market demand for the product or service, you can almost always count on an established customer base to help your business take off.

Valuable Support

Franchisees are part of an extensive network within a franchise system. Business Consultants, corporate marketing and development teams, as well as other franchisees are all on board to prop up and help out the other members of the system. A franchise is often like a family—and that means there’s always a helping hand.

Manageable Cost

Because of their size, franchises likely have an established, streamlined operational platform that helps keep franchisees’ buying costs low and margins high. Plus, proof of concept makes lenders more likely to help finance your franchise investment, which can make the launch process easier than it might be with a startup.

Investing in a Franchise: Cons

Success Not Guaranteed

Just like with an independent startup, the success of a franchise business isn’t a guarantee. Like independent business owners, franchisees have to work hard and channel their passion into the business they’re building or run the risk of failure. That said, a franchise’s existing business model can help improve your chances of success.

Not Striking New Ground

For some, purchasing the rights to sell a proven product or service just doesn’t have enough flair or excitement.

Some Franchises Limit Growth

There are some franchises that have saturated the market or want to temper their system’s growth, so they place limits on how much or how quickly you can grow.

Launching a Startup: Pros

You’re Your Own Boss

This is the big draw of venturing into franchise or startup ownership. As long as your business succeeds, you’ll have no one to answer to, no tricky corporate ladder, no unexpected pay cuts or skipped bonuses. It’s the American dream.

Potentially Lucrative

A startup, while risky, can often have a high potential return depending on your industry and business model. Since you’ll be at the top of the company, you’ll be in control of your own paycheck—but so will the market!

An Exciting Adventure

With risk, for some, comes excitement. You’re venturing into unknown territory, working creatively to bring an idea to life, to build something from nothing—it’s no wonder so many people attempt to start their own business.

Launching a Startup: Cons

Success Not Guaranteed

This is probably the top reason people avoid starting their own business: it’s risky. As the saying goes, it takes money to make money. You have to bet a potentially big investment on yourself, your idea, the market, etc. without a roadmap or past successes to rely on for help or ideas.

Costly Investment

To add to the risk, startups can be expensive, costing you both money and valuable time. Since you’re building a business from scratch, you’ll likely need to invest more of your time to ensure it goes according to plan. Plus, depending on your chosen business and any required building, production or equipment costs, your initial investment could end up sky-high.

You’re on Your Own

Unless you can find a dedicated and reliable team of partners, you’re on your own to take on the risk of launching your business. It’ll require long hours and a lot of hard work and you won’t have a lot of wiggle room if things go sour.

Although we tend to lean more toward franchising—we are the home of America’s Best Franchises—we’re happy you’re a brave one, an entrepreneur ready to take on a new adventure. If you so happen to choose franchising instead of launching a startup, we’ve got you covered; search your next business opportunity here.