How to Decide Whether to Start a Franchise or a Solo Business
Have you always wanted to be a company owner but couldn't decide whether to franchise or establish your own? Being torn between the two options might cause you to put off making a decision. Unfortunately, if you've gone to Google for help, you'll be flooded with search results that praise both.
So, which road are you going to take? Do you choose the safer road of franchising but working inside the franchise boundaries, or do you strike out on your own and start your own business? Because the Accountants360 team works with a variety of small companies, we realize how tough this decision may be. That's why we're breaking down the advantages and drawbacks of each so you can make the best-informed decision to put you on the right track.
The Advantages and Disadvantages of Starting a Franchise
A franchise, when viewed as an alternative to company success, might be the ideal business solution for some, especially if the franchisor and franchisee match is a strong fit. While it is well-known for its advantages, is franchising the more effective way to manage a solo business? You're going to learn.
Advantages of Franchising
1. Franchisor assistance
The ability to receive help from an established franchisor is possibly the most major advantage of becoming a franchisee. When you have a franchisor on your side, you not only get their backing, but you also have access to ideas, business guidance, and networks.
Everything you need, from training to coaching and support, will be provided by the franchisor. Furthermore, they will send professionals to teach you and your team the ins and outs of your brand's objective, product offering, and service style. With the franchisor helping you, you may anticipate your firm to be up and running faster and with fewer errors, reducing the likelihood of your franchise failing.
2. A well-established reputation
When you buy a franchise, you not only get their company name and products, but also their reputation and track record. With a franchise, your brand is already well-known and undoubtedly has a following, so new franchise owners quickly receive access to current clients. Access to existing and new clients who are aware of your existence also implies a faster return on investment!
The disadvantages of franchising
1. Contractual restrictions
A franchise's help and advice are constrained by contractual obligations. These might include everything from geographical location to displays, price, delivery methods, and service offerings.
If you're more creative or have a lot of company ideas that you want to put into action, franchising may not be the best business model for you because it's all about trusting the system and taking advantage of a tried and established business strategy.
2. Ongoing charges
Being a franchisee also entails paying continuing fees to the franchisor. Yes, you receive access to pre-existing clientele and a quick ROI, but this comes at a cost. When you join a franchise, you may anticipate expensive entry fees as well as a monthly cost that covers the use of the franchise's name, branding, marketing, technical support, and business growth strategies.
It's also worth noting that if the franchisor's circumstances change and he or she decides to sell or abandon the firm, it's possible that your portion of the business will be terminated as well, leaving you with financial ramifications. If it doesn't happen, you risk having your franchise agreement terminated rather than renewed at the conclusion of your contract. If you're not a fan of uncertainty, you should be wary of this.
The Advantages and Disadvantages of Starting a Solo Business
Solo company is ideal for those who enjoy being creative and prefer to make their own decisions. It also provides an excellent chance for aspiring entrepreneurs. Although it needs more effort than a franchise, is becoming a sole proprietorship the best match for you?
Advantages of a Solo Business
As a company owner, you may develop and design to your heart's content, which is ideal for people with a creative bent. You make the decisions based on your brand name, logo, and product or service offering. This also implies that you may work on your own time and at your own place. If you wish to work from home and for yourself, starting your own business allows you to do so!
2. Simplicity and lower fees
In many respects, sole proprietorships are the simplest company type to create, and they are uncomplicated. You don't have to worry about hefty start-up costs if you have the correct expertise and preparation (and even the right investors). This is especially true if your firm is situated at home, allowing you to avoid paying rent. You're also given the option of deducting company expenditures and losses from your taxes.
The Disadvantages of Running a Solo Business
1. Competition is a disadvantage of running a solo business.
As a startup company, you are a little fish in a huge pond. Depending on your product offering and sector, your market may be tremendously crowded, making it all the more difficult to stand apart. Differentiating your business is essential, so seeing what other firms do well, even if they aren't in your field, and performing better or identifying a market gap will provide you an advantage. Don't get discouraged if you consider it; every great business began somewhere, so while it may appear to be an uphill struggle, your business may thrive with time, patience, and the appropriate business decisions.
2. Inadequate experience
Unless this is not your first business, you will be lacking the blueprints on how to manage a profitable business. That's not to argue that even experienced business owners always know what they're doing; it's simply that new and inexperienced business owners are more prone to make mistakes. For example, 20 percent of Australian firms fail within the first year, but when asked why, the most common reasons were a lack of funds (29 percent), being outcompeted (19 percent), inadequate marketing (14 percent), and, most importantly, a lack of a market demand for the services or products (42 percent). While all of this appeared to be a bad omen, the good news is that these drawbacks may be avoided with adequate research, counsel, and teamwork.
The Verdict: Which Business Model is Right for Me?
We've given you a lot to think about throughout this blog, but you're probably still asking "which business model is the best?" Although you may not want to hear it, there is no proper answer to that question. Finally, it comes down to your tastes, experience, future ambitions, and what you're willing to contribute to this new endeavour. Everyone can find the appropriate match, whether it's a franchise or a solo proprietorship. All you need to do is identify what you need and desire as a business owner to determine which model is ideal for you.
How Accountants360 Can Assist
If you've assessed the benefits and disadvantages of owning a business vs joining a franchise and decided on the latter, Accountants360 offers the ideal option for you. Contact us on (07) 3804 7575