One of the biggest decisions entrepreneurs will need to make is what kind of business they would like to launch. There are basically two main kinds of business, no matter what industry, and these would be independent startups or franchises.
If you are in the process of deciding on what kind of business you would like to launch, perhaps you should first think about those all-important resources necessary for success. No business can survive long without resources, so let’s look at some of the most valuable resources you will need and a word about where to find them.
The Difference Between Independent Startups and Franchises
There are times when nothing but launching a startup will satisfy your needs. This would probably be the kind of business providing unique products or services you couldn’t provide as a franchisee.
However, as an independent business you will need to find every resource without the benefit of being able to benefit from a recognised brand, standard operating procedures, training and even products or services. On the other hand, a franchise will offer all of the above and more.
Resource 1: Funding
Whether you are an independent business or a franchise, there will be times you may need a bit of extra funding to keep cash flow going. Since you will already have a business account open at a bank through which all your financial transactions take place, that would be the logical place to start. You may wish to open your business up to angel investors or seek funding from a factoring lender.
Whatever the case, only traditional funding such as business loans from your bank would be viable for a franchise. You are the franchisee so you couldn’t very well request investors. There may be times when you can get funding from a factor, but that would only be possible if you had the type of business that could show invoices.
As a franchisee of a corporation like McDonalds, this type of loan wouldn’t be possible. Also, the franchisor may have written into the franchise agreement what kind of funding you are ‘allowed’ to pursue.
Resource 2: Training
This is an area that can especially be a cause for concern for an independent business. Unlike a franchise with a standardised training regimen in all franchises, an independent business must write their own training manual or procedures.
A franchisee, on the other hand, has the benefit of all training manuals and training resources of the parent company. With that said, there is nothing to say that even franchises fall short in the area of training.
One of the most common problems you may face with franchise training is standardising company training. If you find that you are finding weaknesses in a franchise training procedure, it could be that the franchisor needs something like online training software that can be accessed no matter where they are located.
This training software must be adaptable to the region in which the franchise will be operating. The main weakness is in lack of communication in regard to any questions which may be raised from time to time.
Resource 3: Marketing
As an independent business, you would be responsible for all marketing and advertising for your company. Everything from your logo to the types of advertising and marketing you wish to employ would be chosen by you. On the other hand, a franchise can piggyback off the parent company’s marketing and advertising.
This is one of the benefits of launching a franchise. This is due to the parent company, the franchisor, having already chosen marketing tools such as logos and slogans that work well. As a franchisee, whether you have a product or a service, you can draw upon corporate advertising to ensure your franchise gets the foot traffic and customers already established.
Why Resources Are So Important
In the end, it all boils down to success and profitability. Whether you choose to go the route of launching an independent business or decide that a franchise is more in keeping with your needs, the fact is that you need to find the resources you need to stay in business past those early days when many startups fail.
In fact, before year three, only 40 percent of startups are still in operation whereas more than 97 percent of franchises are still in business based on strong profitability.
It’s all about that bottom line and if you want to take your chances on an unknown or bet on the success of a franchise, then you should at least understand the resources you need before investing all your hard-earned resources into an unknown startup.
After considering all of the above, which type of business best suits your needs as an investor? Are you ready to walk in the proverbial dark or would it be better to have established resources on hand?