Transitioning from being an employee to an employer has a certain allure. With the growing popularity of entrepreneurship, people of all ages, from teenagers to retirees, are running their own businesses – sometimes referred to as ‘pensionpreneurs’.
For those who want to embark on this journey, there is a crucial question to answer: should you start a start-up or invest in a franchise? Both options come with their own set of pros and cons, which are discussed below.
Spot the difference
It’s essential to understand the difference between a start-up and a franchise before making a decision. The former is a new business run and invested in by entrepreneurs who offer a service or product that they believe is needed in the market. Examples of successful start-ups include Facebook and Airbnb. On the other hand, a franchise is a license that allows a franchisee to sell goods or products that belong to an established business, granting access to the parent company’s operating systems, stock, and supplies. McDonald’s is the most well-known example of a successful franchise.
A franchise comes with numerous benefits. The primary advantage is the use of a proven business model, which means that franchisees only have to oversee the daily operation of the business, increasing the likelihood of success. Moreover, the franchisor’s brand awareness creates an existing customer base. The training system across the company is another significant advantage which enables franchisees to develop skills in areas such as employee training and management, and marketing the product.
Start-ups offer autonomy and the freedom to explore different options. This option is an empty canvas that requires a lot of innovation and creativity. It is the perfect option for those seeking to be the captain of their own ship. Moreover, professionals that opt for start-ups enjoy the complete freedom to operate without any pressure or supervision.
The main issue with franchises tends to be the steep fees. From the outset, these fees can be very high, and there are also ongoing payments that might ultimately be unsustainable. Moreover, franchises operate under strict guidelines from the franchisor, which may seem restrictive to some people.
However, the major con of start-ups is the higher possibility of failure. The creative and professional freedom to venture into a new business is worth the risk of investing in a product or service that might fail, leading to a high amount of loss of capital.
Both options involve significant financing from the outset before any profits can be made. Fledgling entrepreneurs can be smart with their savings or choose to explore small business loans that are available. Regardless of what option seems most appealing, taking the time to determine which is most appropriate for your specific needs and goals is the best way to approach this decision.