Four ways to decide if a franchise or a new business is for you

Did you know, nearly 70% of job seekers have an aspiration to own their own business1? But – should they buy a franchise, or invest in a new business?

Below are four areas to consider that will help you decide whether you should buy into an established franchise brand, or if you should go it alone.

1. Brand

  • New Business

With a new business you will get the opportunity to create your own brand from scratch, designing and promoting it how you want. This can be quite exciting, of course this will require an investment in time and money before you can get going.

  • Franchise

With a franchise you will buy into an established brand. Whilst you won’t have the freedom to make changes to it, you will share in the success of others. This allows you time to get on with other important business aspects.

2. Success rate

  • New Business

If you’ve got an idea for a business that’s not been done before, then a new business is definitely the way to take it to market. Indeed, lots of startups have great success. However, you should know that over 50% of new businesses fold within their first year of trading2.

  • Franchise

In franchising the success rate is much higher. The British Franchise Association (BFA) state that over 90% of franchises report profitability3. Whilst there are franchises in nearly every industries to suit every skill set, there are limits on your creativity as you will be selling the brand’s products or services.

3. Operating System

  • New Business

If you want total freedom, starting a new business is 100% the way to go. Not only will you design the brand, but you will be in charge of the entire operation from top to bottom. At the same time, you will be much more exposed to the market. If you are creative and want to take on that risk, starting a new company is the way forward for you.

  • Franchise

If you want to have the benefits of being your own boss but want less risk, franchising is a more suitable choice. All franchises require you to stick to established structures and formulas. This includes training and usually help in setting up. If you are good at sticking to systems, this is definitely more you.

4. Costs

  • New Business

A new business requires as much or as little investment as you want to put in. This gives you the flexibility to move your money around at times that suit you and invest at times that suit you. Of course, after tax and other payments, all money you make is yours.

  • Franchise

As franchising is prescriptive, most franchises outline a business model for at least the first 6 months to two years. On top of an initial franchise fee which is required to buy in to the brand, there are usually royalty fees that are required monthly, these range from 5-20%. This is worth considering into your profit projections. Of course, if you stick to the proven formula, profit shouldn’t be a problem.

Decided if franchising is for you? Check out our latest opportunities to see what suits you.

  1., 2014

  2. BFA, 2014

  3. Guardian, 2015

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James Coombs

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