It seems to me that similar to the political climate theses days, business buyers are very polarized when it comes to their thoughts on buying a franchise versus an independently owned business. Most people either love or hate the idea of becoming part of a franchise system. There is no right or wrong, each business buyer should do their due diligence and determine what is best for them, keeping an open mind throughout the process.
Here are some of the main advantages to buying a franchise…
- As the saying goes, franchising is about “being in business for yourself but not by yourself”. Franchising is a great option for those buyers looking to start their own business but like the idea of having the security of a franchisor and their proven systems to rely on. A first-time business owner may find it a bit daunting to not have any safety net to rely on when difficult decisions arise. Having a franchisor’s corporate support staff to assist you through these times can be a calming influence.
- The statistics show that franchises offer a better success rate than independents. When you buy a franchise you are gaining years of experience spent by the franchisor building their brand and systems. They have done the trial and error of figuring out what works and what doesn’t so that you don’t have to.
- As part of a larger system, you typically have access to discounts when purchasing inventory, supplies and equipment from vendors who recognize the purchasing power of larger systems, thus reducing your overall expenses.
- Similar to the first advantage, as a franchisee, unless you are the very first one, you have other franchisees in the system that you can network with and share thoughts and questions pertaining to the operations of your franchises. Having a “support group” of like minded individuals is another advantage to going it alone.
- If SBA financing is a key element of the purchasing decision, generally speaking franchises fair better in the eyes of lenders due to their track record than do independents, although each case will be critiqued on its own merit.
Here are some of the main advantages to buying an independently owned business…
- For those that like to “be their own boss” and make 100% of the decisions, purchasing an independently owned business may be a better choice. After purchasing the business and being trained by the former owner(s) on the operations, a new owner can make any changes they wish without the consent of a corporate office. This typically bodes well for C-level managers who are exiting the corporate world and are somewhat used to making strategic decisions.
- The main complaint about franchises are the royalties. As an independent, there are no royalty fees on sales or advertising fees dictated by the franchisor. Of course without those fees means there are no franchisor services that go along with the fees. An independently owned business will need to staff up and/or spend money on marketing/advertising as they see fit.
- Another complaint is the Contractual agreement. When you buy a franchise you sign an agreement which locks you in for a specified amount of time (usually 10 years). Breaking a franchise agreement can be difficult and costly. When owning an independent business there are no franchise agreements to be concerned with.
- When it comes time to resale your business, as an independent you will not have to rely on the franchisor’s approval of the buyer which can delay the process several weeks.
In summary, generally speaking if you are a business buyer who is a bit creative and enjoys making critical decisions then you might be more happy purchasing an independently owned business, whereas if you are better at taking a blue print and executing the instructions and like the idea of having a phone number to call when you need assistance then going the route of a franchise may be a better decision.