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Is it good to start own business or take franchise? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Raad Ahmed, CEO of LawTrades, on Quora:
Is it good to start own business or take franchise?
The answer to this question will depend on what your personal goals are as a business owner. Either option has advantages and risks associated with it that should be considered before embarking.
For a Franchise:
Franchises offer a tried and true business model that takes the guess work of how to get up and running. When you sign a franchise agreement, you pay the franchiser a franchise fee to license the right to use the name and processes of the business. The franchiser will then often assist you with selecting your location, setting up your store, connecting you with their suppliers, training your staff, and getting your business up and running. There is a lot less reinventing of the wheel when you decide to participate in a franchise because the goal for the franchiser is to deliver a consistent experience across all locations.
The downsides to a franchise are that you often have to pay ongoing royalties to the franchiser based on the location’s sales, which can cut into profits. You will also have little to no creative control over how to run the business as all changes to the model or product/service offerings typically have to be approved by the franchiser. Finally, you also run the risk that bad publicity about the franchiser or another franchise location could in turn hurt your business.
For your own business:
With your own business, you have the opportunity to start from the ground up. For some this is incredibly exciting and for others it can be quite intimidating. This situation is best for those that have a unique business idea that has not been done before and those who want to exercise a high degree of control over how their business is run and how decisions are made. When you run your own business, you get to call all of the shots.
However, the downside to starting your own business is also that you are starting from the ground up. You will have to create and grow a brand, develop an aesthetic for your locations, decide what types of goods and services you will offer, and implement all of these decisions. This can take a significant period of time and that learning curve may prove to be financially costly. You will want to be sure that you have enough in capital or potential investment to support the business during its development phase. There is also more risk involved as it is not an established model and could run into unforeseen obstacles along the way.
Whatever you decide to do, it would be a good idea to speak with a business attorney who can guide you and help you think about the legal and compliance aspects of operating your business. Franchise agreements can be particularly complex and it is important to understand your rights and obligations going in. Additionally, starting your own business can be challenging as you attempt to navigate entity formation, labor laws, and engage in tax planning.
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