If you’re planning to become your own boss, one option you might want to consider is becoming a franchisee. In a franchise everything’s already laid out for you in terms of the products you’ll sell and the marketing plan. Many people prefer becoming a franchisee over starting a business from scratch. Still, there are several differences between being an entrepreneur and being a franchise owner that you should be aware of.
1. There’s Less Risk with Franchises (But Still Risk)
Many franchisees are attracted to the fact that they’re buying into a proven business. After all, there are thousands of burger franchises across the country. People are already familiar with the brand, so you don’t have to work to establish it on your own.
Still, it’s important that you know that there are risks with running a franchise. No business is guaranteed, and it will be susceptible to all the same threats as any other business, including recessions, competition, and location (a bad location for your franchise can kill the business).
2. You Have to Follow the Rules as a Franchisee
While technically, yes, you are a small business owner as a franchisee, you essentially sign up to have a master, your franchisor, who will tell you exactly how to run your business. You will sign a contract agreeing to do business the franchise’s way, and there may be penalties if you don’t.
You can’t, for example, change the brand logo, or add new products the menu. The franchise may provide you with marketing materials (though you may have some freedom in how you market locally through newspaper ads, events, and social media).
3. Being a Franchisee is Expensive
Becoming a franchisee involves paying a franchise fee to the company. This is essentially your buy-in fee to have the right to use the brand’s name and products. But you’ll also probably pay a monthly royalty fee based on your sales. When you start your own business, you pay for start-up expenses — like your website, marketing services, inventory, uniforms, etc. — as they come up, and you’re beholden to no one over the long-term.
4. An Entrepreneur Has More Creative License
Because franchisees are limited in the creative decisions they can make, many who want to color outside the lines prefer to start their own business. That way, they can set up exactly how the business will operate, what they’ll sell, and how they’ll market it. If you feel stifled by other people’s rules, franchising might not be for you.
It’s important to understand the difference between starting your own business and buying a franchise. Based on your personality and preferences either one could work for you.