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.
  • moeti

    The stringent laws and policies governing the Franchising are too distance to aspiring black entrepreneurs who

    The stringent laws and policies in regard of Franchising are distancing themselves from SMMe’s development endeavors. Should lack of finance supersede the experience? I am quite aware that, they are in business for making money but the Franchisors too should have a meaningful contribution in assisting and / or relaxing some of their laws in making a viable entry into their established markets.

    Example like Chicken lichen, which requires that, one should have R135 000.00 unencumbered funds.before even considering the R1 350 000. I am a man with 15 yrs experience in food and beverages or hospitality industry at managerial level.Should the idea of owning that Franchise and create the much needed employment in the rural areas be unattainable because I don’t have the actual required funds to kick-start the venture?

    They have all the systems in place to monitor and observe on daily basis any progress deviating from the actual agreement and be able to redirect it to their required goals and needs. Franchisers to me are like DTi with all the business support structures and systems to monitor where their money is being spend on yet, their deep-pockets blind them in the name of the system.

    The government or DTi come up with all the funding institutions like your NEF, IDC, NYDA, SEFA and the latest”FIn Find’ which to me is yet another finder-finder scheme in a sense that, they are no different to commercial banks. The latest FIn find, requires collateral and security yet is aimed at the SMME’s which some have registered certificates and have business plans but no funding. What is the point of creating multiple public funding institutions which cannot address the core problem/s?
    It’s a replicate of everything which has never benefited any rural community of which are the recipient of. The recent interview on Interface to me when minister said that, they have only been active for two years and are still in “teething Stage” is a very lousy and lame excuse. We forwarded our suggestions yet to see and hear the minister of enterprise development taking such an exit simply mean one thing, were most if not all the recommendations and suggestions forwarded ever taken into consideration?

    As an entrepreneur, I would presume that most of the comments and suggestions were about FUNDING. We must bear in mind that, the department is only two years old but we are not. We have been struggling with funding for the last 10 years. The excuse of the minister of Small and Medium Enterprise Development to me shows detachment from the same mandate she was mandated to execute.

    There’s a Chinese proverb that says” Fish rots head first”. This must be understood in the context that is outlined above not as it sounds. The government should and must take the lead in making funds available to entrepreneurs, if indeed Smme’s are the driving force of the economy and the private sectors will follow suit. It’s your laundry you need to wash it than sending it to the launders.

    Give entrepreneurs a sense of belonging in a sense that, they can dream and do all the feasibility studies and you will step in Minister. Give us commitment and we will emancipate our brains and come with vibrant economic and employment aligned ideas to make the difference in our communities.

    I understand that, entrepreneurship is not a self-enrichment scheme but rather an upliftment of the community socio-economic aspects of their lives. Until such a time as there’s a compulsory policy and/or Law that states that, in order to have a true empowerment, for every three year government tender awarded, 45 percent should be given to the employees at the 18 months interval of the contract so that when the actual contract ends, a group of the same employees who by then should have registered their company or cooperative would be able to continue, especially cleaning, gardening and so on which are not a once off thing. This is what my company Borwa Bo Phintse Pty (Ltd) would like to introduce as our empowerment catch-phrase says it all” Empowering < Than One In Face of Adversity". The current strategy/ies failed dismally in addressing Black Empowerment, a not so welcomed strategy as above will put an end to self-enrichment which has and is still failing our communities.

    I define BBBEE as Black Based Businesses Employees Exploiters, I know not all are like that but 80 -90 percents are exactly what i am saying. For the record, WE CANNOT BREAK THE "BRICKS" or at least align our developments with them especially INDIA. I personally hate Cooperatives in South Africa or do not have the brain for the South African Cooperatives context or approach. Who said a black person must always start beneath the sole. You are black and must start very very small. You don't have what it takes to start a R5 million project you must wait for tenders.

  • moeti

    The stringent laws and policies governing the Franchising are too distance to aspiring black entrepreneurs who

    The stringent laws and policies in regard of Franchising are distancing themselves from SMMe’s development endeavors. Should lack of finance supersede the experience? I am quite aware that, they are in business for making money but the Franchisors too should have a meaningful contribution in assisting and / or relaxing some of their laws in making a viable entry into their established markets.

    Example like Chicken lichen, which requires that, one should have R135 000.00 unencumbered funds.before even considering the R1 350 000. I am a man with 15 yrs experience in food and beverages or hospitality industry at managerial level.Should the idea of owning that Franchise and create the much needed employment in the rural areas be unattainable because I don’t have the actual required funds to kick-start the venture?

    They have all the systems in place to monitor and observe on daily basis any progress deviating from the actual agreement and be able to redirect it to their required goals and needs. Franchisers to me are like DTi with all the business support structures and systems to monitor where their money is being spend on yet, their deep-pockets blind them in the name of the system.

    The government or DTi come up with all the funding institutions like your NEF, IDC, NYDA, SEFA and the latest”FIn Find’ which to me is yet another finder-finder scheme in a sense that, they are no different to commercial banks. The latest FIn find, requires collateral and security yet is aimed at the SMME’s which some have registered certificates and have business plans but no funding. What is the point of creating multiple public funding institutions which cannot address the core problem/s?
    It’s a replicate of everything which has never benefited any rural community of which are the recipient of. The recent interview on Interface to me when minister said that, they have only been active for two years and are still in “teething Stage” is a very lousy and lame excuse. We forwarded our suggestions yet to see and hear the minister of enterprise development taking such an exit simply mean one thing, were most if not all the recommendations and suggestions forwarded ever taken into consideration?

    As an entrepreneur, I would presume that most of the comments and suggestions were about FUNDING. We must bear in mind that, the department is only two years old but we are not. We have been struggling with funding for the last 10 years. The excuse of the minister of Small and Medium Enterprise Development to me shows detachment from the same mandate she was mandated to execute.

    There’s a Chinese proverb that says” Fish rots head first”. This must be understood in the context that is outlined above not as it sounds. The government should and must take the lead in making funds available to entrepreneurs, if indeed Smme’s are the driving force of the economy and the private sectors will follow suit. It’s your laundry you need to wash it than sending it to the launders.

    Give entrepreneurs a sense of belonging in a sense that, they can dream and do all the feasibility studies and you will step in Minister. Give us commitment and we will emancipate our brains and come with vibrant economic and employment aligned ideas to make the difference in our communities.

    I understand that, entrepreneurship is not a self-enrichment scheme but rather an upliftment of the community socio-economic aspects of their lives. Until such a time as there’s a compulsory policy and/or Law that states that, in order to have a true empowerment, for every three year government tender awarded, 45 percent should be given to the employees at the 18 months interval of the contract so that when the actual contract ends, a group of the same employees who by then should have registered their company or cooperative would be able to continue, especially cleaning, gardening and so on which are not a once off thing. This is what my company Borwa Bo Phintse Pty (Ltd) would like to introduce as our empowerment catch-phrase says it all” Empowering < Than One In Face of Adversity". The current strategy/ies failed dismally in addressing Black Empowerment, a not so welcomed strategy as above will put an end to self-enrichment which has and is still failing our communities.

    I define BBBEE as Black Based Businesses Employees Exploiters, I know not all are like that but 80 -90 percents are exactly what i am saying. For the record, WE CANNOT BREAK THE "BRICKS" or at least align our developments with them especially INDIA. I personally hate Cooperatives in South Africa or do not have the brain for the South African Cooperatives context or approach. Who said a black person must always start beneath the sole. You are black and must start very very small. You don't have what it takes to start a R5 million project you must wait for tenders.