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Business Franchising vs. Going It Alone

Jun 19, 2008
Business franchising is a popular business model across the world, and one that has given rise to many household brand names we think of today. Particularly in fast food, franchising has proven to be globally successful, and has created multi-billion dollar businesses in a matter of years by licensing business models and goodwill to other entrepreneurs and investors. But a question most people new to the business franchising setup will ask, and rightly so, is whether it's better to opt for a franchise or to start up a business from scratch off their own accord, which has its own advantages and disadvantages as compared to the business franchising model to which we've become accustomed.

One of the most notable advantages to any business franchising arrangement is the benefit of prior marketing and goodwill, which should have been acquired by the franchisor and other franchisees in existing areas. Obviously this is particularly hard to quantify, but you should be able to gauge from the success of other franchises and the franchisee selection process whether it is likely that the business will have built up the kind of reputation that proves value for money. Another obvious advantage of going with a business franchising model is that you have a ready made business model, which is consequently less likely to fail than going it alone. Because the business has been tried and tested elsewhere, this also makes business franchising models more investable from the perspective of banks and other lending institutions.

There are however, some clear advantages in going it alone in business that may not be shared in certain business franchising agreements. Firstly, when starting your own business from scratch you have absolute freedom in the direction of your business at a strategic level, and you are not answerable to anyone other than yourself. You have full freedom to sell or lease your business to another party if you so choose, and there are no financial payments required to any other party, either on startup or on a royalty basis. While there are obvious risks associated with starting up on your own, there may be much to be said for the fact that there are plenty of plus points in going it alone.

There are obvious advantages to going it alone in business, but the same can be said for the business franchising model. Likewise, in reverse there are negative sides to running a franchise just as there are negative sides to starting a business from nothing and trying to make a success. The trick is, for the budding business owner, to ensure he has weighed up the positive and negative aspects on either side of the table prior to making any firm commitment, in order to best ensure he's made the right decision. Remember that not all business franchising opportunites are created equal, and some may prove more advantageous than others depending on the specific terms of the agreement. However by doing sufficient background research, it should be clear exactly what is the best business decision in your circumstances.
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