Buying a Franchise VS Starting a Business

What are the main differences between franchisee and entrepreneurs? Which one are you suitable for? February 20, 2017

What makes franchisees and entrepreneurs polar opposites is their driving force.

Let’s say you’ve come to the point in your life when you want to invest in something big. You’re going through different options and then an idea strikes you. To be an entrepreneur!… By this point you, the readers, are divided into two groups. The YAY-one and the NAY-one.

The YAY-one is all about taking that challenge and turning it into something worthwhile. The NAY-one is not very keen on the idea of risking so much. They are people, who aim for a more secure business plan. Which makes them more likely to buy a franchise, rather than create a start-up.

What other traits do successful entrepreneurs and franchisees have? If you’re hesitant about which path to take – read on. We’ve covered the topic in depth below.

What is a franchise?

Franchises are an already established business, meaning there is less risk of failure. Usually, that’s what draws people into buying a franchise. With a small investment and see results right away. We’re talking the same-week-right-away. If you’re an excellent manager, you’ll be a profitable franchisee. But you have to be able to follow rules. You run a business in the name of somebody else. You can’t make your own set of rules. Your actions have to be in line with the message of the big company. That’s what makes franchises sustainable. They don’t depend on one person, they depend on an idea.

Still, it’s good to remember that no business is 100% guaranteed. But at least you have your franchise disclosure document with which you can prevent certain unpleasant situations.

Franchise businesses are also preferred by people, who don’t have any experience. A good franchisor* should guide you through the whole process. The ongoing support is of quite the importance, but practices differ from business to business, so make sure to ask yours about that.

The payment also varies depending on what business you’ve chosen. For example, you can have small upfront payment + monthly royalty fees or only upfront payment without additional charges.

*If you don’t know the differences between a franchisee and a franchisor, we advise you to read our What is a franchise? blog post.

Entrepreneur Description

Entrepreneurship sounds like a mystic unicorn. There are countless books and articles on the topic. People tell their inspirational stories how they finally started chasing their dreams. Everybody at some point has thought about that too. To create your own business and not have a boss is appealing to a lot of people. But not a lot of people have dared to do so.

Entrepreneurs are risk takers. They work from scratch with just an innovative idea for a foundation. People feel empowered to create something from literally nothing and then to develop it and grow it. You have to be hopeful about the future otherwise things won’t work out. Nobody can tell with certainty how much time and money have to spend until you finally make a profit. Entrepreneurship is for the more adventurous people, who are ready to take the hard way to success in the name of an idea.

Independent business owners have the advantage of choosing which direction to take for their business plan. They can make drastic changes if something doesn’t perform right. They can be a one-man army and still make things work.

But you have to be realistic too. Is your idea innovative? Is your solution helpful to people? Is there an established business, which can already offer that? Is your business different from it?

If you can’t answer positively to any of those questions, there is a chance your business won’t succeed.

From Entrepreneur to Franchisor

There can be a transition – an entrepreneur to become a franchisor. Then the start-up enthusiast should learn how to translate their own message to other people, to help them feel as a whole, to make them care. It is a very difficult process, as the nature of the entrepreneurs is completely different – they are fighters and they’ve learned how to make things happen their way by themselves. To be a franchisor means you have to be selfless and have the ability to empower people. To the most successful entrepreneurs, such transition is hard as they are what they are because they can’t obey the rules. They have to have the ability to delegate tasks, not just tell people what to do.

Final Takes on Franchisee VS Entrepreneur

If you wonder whether to buy a franchise or to develop a startup – listen to your gut. What are your preferences and personality traits? You can be successful in either one. Still not sure which one to choose? Here’s a small graph to sum it up with a few words.

Franchisee → Wants a secure business. → Buys a business built by a big company. → Rules and a known amount of investment. → Run a business with profit from day one. / The business fails due to outside factors.

Entrepreneur → Has an innovative business idea. → Starts to build a business around it. → Trials, tribulations and an unknown amount of investments. → Sets foot on the market and profits. / Bankrupts.

We can’t miss re-posting this amusing quote:

Franchisees speak with their families, friends, coworkers, hire consultants and develop business plans to build a plane before they jump off a cliff.
Entrepreneurs jump off the cliff and figure out how to build the plane on the way down.

The quote is taken from Franchise Marketing Systems’ Blog Post.