This is such a huge question. In the US people generally know and understand what a franchise is, they are clear about the advantages, which is why they are so prolific. Here in the UK the advantages are a relative mystery which is slowly being revealed.
So, what’s the difference between being a franchisee or starting your own business from scratch?
More and more of us want the dream of being our own boss, of being in control of our time, lives and money to become a reality, and why not? I’ve done it. Why don’t you? You can take your business idea and a blank sheet of paper and create your own empire OR you can borrow somebody else’s by buying a franchise. The big question is, how to choose between the two options, which option is right for you?
With both options you will be your own boss but with some clear and distinct differences
The Franchise Option – you invest in a franchise, just as you invest in your own business idea with one key difference before you handover your hard-earned cash. Franchises are awarded. Yes, you have to meet qualifying criteria to secure your chosen franchise, your franchisor wants to know you are going to succeed and not waste your investment. Once you have signed on the dotted line, you will automatically be part of a system that fully established and proven to be successful. All of the groundwork, the blood, sweat and tears work has already been done, often many times. You have bought yourself a fast pass straight past the endless paperwork, trials, errors, legalities and excessively huge excel spreadsheets. As a franchisee the formula is simple, business model + you=success. Benefits you can expect as a franchisee that won’t happen as a business owner:
- On-going support – your franchisor isn’t just there for you at the beginning, they are with you throughout your journey, remember, your success is their success
- Operational support – franchisors have been experts in their fields for years, if there is something you need or is bothering you, just ask, they’ve probably seen it all before
- Prior experience not necessary – you don’t have to have direct business experience to be successful in a franchise, your franchisor will be looking for relevant skill sets, ours are mostly about communication and organisation. The business model and support systems will ‘hold your hand’ as you establish and grow your franchise
- Training – you should expect plenty of training to cover the majority of the processes within the franchise and 121 coaching for anything else with on-going mentoring and training throughout your franchisee journey
- We do the numbers – your franchisor will be keeping a keen eye on ‘the numbers’, they need you to succeed
- Success – it is fact that franchises have a better rate of success than start-up businesses
- Finance – because of all of the above, it is far easier to secure finance for a franchise than a business idea that is starting from scratch
All of these benefits meld together to make the business model, it comes to life by adding the franchisee, you. It’s not quite ‘just add water’. You will have lots to learn, plenty of challenging situations and you will need to remain determined. The formula works, others are already using it successfully, you just need to roll your sleeves up and put in the right effort.
So, what’s the downside?
As with everything in life, there are downsides to investing in a franchise but at the same time, you may see these as advantages that reduce risk:
- The Franchise Agreement – a very formal agreement spelling out the relationship between franchisee and franchisor
- Established processes – these are to be followed as part of the formula, inventing your own processes won’t be part of the deal however a good franchisor will want to hear any suggestions you may have
- Compliance – you will need to comply with the franchise agreement and operating manual
- Territory – you invest in your franchise territory and cannot trade outside of this without the franchisors express permission
- Reputation – if your fellow franchisees are not delivering the same great customer service, it may rub off on you but you can lobby your franchisor to take action
- Fixed term – your franchise agreement will be for a fixed term, ours is 5 years. During that time, with certain consents from the franchisor, you may choose to sell your franchise business because your life has changed in some way. When you come to the end of your franchise term, there is no guarantee the franchisor will renew your agreement, you should open the conversation as soon as possible to know where you stand
Starting your own business from scratch
This is the option I took back in 2002. Blank piece of paper, borrowed computer under the stairs, payroll with pencil and paper, making marketing cards with the kitchen scissors, basically doing absolutely everything. This route to business isn’t for the feint hearted or those who don’t find determination to learn the full 360 of business easily. Mental and emotional gymnastics are normal but you are liberated, totally free to determine everything about your business.
So, why would you choose this option?
- Definitely less upfront costs – as I’ve said, I got underway with a borrowed computer, pencil and paper. My business grew very slowly over many years because of this approach but I was able to flex and adapt easily
- Definitely more costs overall – because there is so much trial and error to develop all of the amazing processes which go to make up a successful business model formula
- Huge satisfaction – I was never artistic or creative at school, starting my own business revealed that my mind is stuffed full of innovation and creativity in the entrepreneurial sense
- Even more satisfaction whilst you are broke – outsourcing elements of your business is not on the agenda due to restricted funds for quite some time. You just have to get on and do everything yourself. On the upside, you learn new tricks that are of benefit in the long run.
And the downside?
- Huge risk of failure – the majority of small businesses fail within a year
- Low income – overheads with a low and growing customer base means limited cashflow and you will find yourself investing every spare penny in the hope of success
- Restricted resources – all those pennies being reinvested also means borrowing, recycling and repurposing are not just sensible but essential
- Blank sheet of paper – how things are done for the best result takes a while to sort out, quite a bit of experimentation, lots of evolution. Fun, but easy to ignore difficult challenges in favour of trying to get money through the door
- Sleepless nights – plenty, put a pen and paper beside your bed, you will need it
Business owner or Franchisee, which one will be better for you?
Only you can answer this question and it is important that you answer it honestly. How much risk is comfortable for you? How long are you prepared to go with low pay? Will you succeed with bookkeeping as well as marketing, are you a medallist in mental gymnastics? A loan trader or owner with team? On the investment front, the upshot is that at least the same amount of money will be spent on creating your own business, very likely much more.
Would you like to chat through your options? We are here to help and listen as well as provide you with information about the Domestic Angels Franchise. Either call 0333 577 2650 or click https://calendly.com/lisa-domestic-angels to book your private meeting with an expert.