Start a New Business or Buy a Franchise - Which Is Better?

Start a New Business or Buy a Franchise - Which Is Better?
MoreBusiness.com
Published August 14, 2008

Here are some comparisons and differences that will help you make up your mind on whether to start a new business or buy a franchise business.

To Set-Up vs. Already Set-Up
Starting a new business would require you to set-up everything from scratch and experiment with the right product range for some time until you get it right.

By buying a small business franchise, you will just be replicating a successful formula. This will reduce the time required for your business to stand on its own two feet, and will also alleviate the pain of searching for your target audience with your products in hand.

No Fees vs. Franchise Fees
If you start a new business, you will not have to pay any fees to anyone. But to buy a franchise business, you will need to pay franchise fees and royalty fees, either for a fixed term or on an ongoing basis.

This could result in an increase in your initial investment - and maybe even in a drain on your future profits.

Own Marketing vs. No Marketing
While you will need to formulate and pay for your own marketing strategy, including your advertisement expenses if you start a new business, the same will not be the case if you buy a franchise business.

The parent company will handle the marketing blitz and all the advertisements, and it will benefit all the small business franchisees. This will provide you with additional time and effort to increase your sales.

Pricing Strategy vs. Fixed Pricing
When you run your own business, you can set prices according your assessment of the market conditions.

However, in the case of a small business franchise, the parent company will decide the pricing strategy for all its franchises. You will only be informed about the prices that you have to quote to your customers.

The entire market research is done by the parent company, and the prices are decided accordingly.

Full Freedom vs. Limited Freedom
While running your own business provides you with the freedom of making or changing your decisions and basically running the show as you see fit, a small business franchise will offer you only limited freedom.

You will not be able to change or reject some policies of the parent company just because you do not feel that they are right. You will be bound by all the rules and regulations that are specified in your small business franchise agreement with the parent company.

Thus, while you will always be the head of your own business, you will never become the captain of your franchise.

Large Mistakes vs. Small Mistakes
In starting and managing your new business, there may be many big mistakes that you will probably commit before you learn the tricks of the trade.

But in the case of a small business franchise, the parent company will probably already have eliminated a majority of the mistakes throughout its evolution; thus, you may end up committing only some minor mistakes before settling down.

Both starting a new business and buying a franchise have pros and cons. Make sure you take the above points into consideration before you make a final decision.

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