Franchise Or Start-Up?

Franchise Or Start-Up?

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While many associate entrepreneurship with starting a business from scratch, purchasing a franchise is often an easier and less risky way of becoming an entrepreneur. But do you have the right personality for a franchise?
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Franchising can offer an easier and less risky entry into entrepreneurship, but it isn’t for everyone. You need to be willing work within the existing system.

As a franchise consultant, I take candidates through a rigorous process of self-discovery to determine if they would be better served starting their own business or pursuing a franchise.

With hundreds of thousands, if not millions of rands at stake, determining the answer to that question is a critical first step towards becoming a successful entrepreneur.

Both franchising and start-ups have their advantages, but the best way to determine which business model will suit you is to know your own strengths, skills, life plan and dreams.

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Someone capable of thriving in a start-up might feel too constricted when operating within a franchise model, while someone else who could succeed inside a supportive franchise system may wither under the pressure and risk of going it alone.

Wonder which business model is right for you? Here are five indicators you’d be an excellent candidate for franchising, followed by four that indicate you’d be better off starting your own business.

You like working within a system

At its core, the value of a franchise is its proven model of success. While franchisees are responsible for the day-to-day operations of their franchises, they operate within a system that provides operational support, marketing and training.

You want to win now

Beyond the proven model of success, franchises offer brand awareness, which means customers are more likely to be familiar with your product or service from day one.

If you’re on the back end of your career, franchising might make sense.

You don’t want to reinvent the wheel

It’s common for most people to feel unsure about which franchise is the best fit for them. However, with so many franchise opportunities available, selecting one that fits your skills and life goals is much easier than trying to figure out a business to start by yourself.

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Scalability is appealing

With many franchises, if you can successfully operate one store, you can successfully operate multiple stores. Though it is certainly possible to scale a start-up as well, it is likely to happen faster through franchising, since the blueprint is already in place.

You’re not ready to leave the job force yet

For people who are looking to work their way into entrepreneurship without giving up their day job, there are several semi-absentee franchises worth exploring.

A semi-absentee model allows you to work on the franchise for ten to 15 hours per week while continuing full-time employment. Then when the time is right, you can exit your day job to focus entirely on your business.

If none of the above is applicable to you, here are some reasons you might be better served starting your own business.

You want the freedom to do things your way

Working within a franchise system means following certain guidelines in order to keep your franchise licence.

If you’re someone who wants to do everything your way, franchising could feel too restrictive.

You already know what you want to do

If you’ve already got your business model and are confident that you know how to make it succeed, paying a fee for a franchise’s business model may sound unappealing.

You’re sceptical of franchising

According to the Franchise Association of South Africa (FASA), the franchise industry is responsible for around 12,5% of the national GDP, and the estimated turnover of the South African franchise market is R465 billion.

South Africa has more than 600 franchised systems, just over 39 000 individual franchise outlets, and the franchising model is spread across 17 business sectors. However, some people just can’t accept franchising as a good path to business ownership. That’s okay, but if you realise you’re one of those people, franchising probably isn’t right for you.

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The higher risk excites you

Are you someone who loves it when things go wrong because it gives you the chance to figure out the solution?

In many ways, franchising is like a giant safety net because you already have best practices in place. When you’re running your own business, all of the problems are yours to solve.

Jan 4, 2016
Jim Judy has spent the past 20 years in the franchise industry, gaining knowledge and developing a keen eye for opportunity. He currently acts as a consultant for Franchoice.