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Startup or Franchise: Which is Better?

Are you tired of working for a boss and want to begin your own business? There are two things you may want to consider: Either starting a business on your own or investing in a franchise.

To help you make the decision, this guide will show you the pros and cons of startups and franchises.

The Pros and Cons of a Startup

  1. Advantage: Innovation and Creativity

When you begin a startup, you need more creativity and innovation. For highly creative people with various ideas, then a startup is the decision for you.

Besides this, the startup costs are fairly lower compared to franchises. You can start your business anywhere and for as low as $10,000, whether in your garage, basement, or wherever most convenient for you to grow your success.

  1. Advantage: Growth and Freedom

When you have your startup, you have the freedom to make your own schedule. You can also work anywhere you’d like to, without having to report to others. Meaning, you have professional freedom and unlimited growth compared to franchises, which would also have limited growth.

  1. Disadvantage: High Failure Rate

Unfortunately, a startup would have a high failure rate compared to franchises. 25% of startups would fail within their 1st year, 50% fail within 5 years, while 30% may fail within 10 years. It’s why companies like Clean Venture Fund conduct a deep research before investing in startups.

This makes it risky to launch a startup, though the high risk would equate to a higher return 

The Pros and Cons of a Franchise

  1. Advantage: High Success Rate

Franchises are proven systems, operating in a common system and responsible for the day-to-day operations. Furthermore, you are trained about the marketing, product line, dealing with staff, among other aspects of the daily operations.

That way, you have ongoing support from the business, bringing you higher chances of success.

  1. Advantage: Brand Recognition

Franchises already have brand awareness in their names even before you bought the name! You already have everything prepared for, such as the target market, products, or services, among other inclusions to establish your business and build profit.

Customers already know about your offerings to increase your sales, so with a franchise, you have the turnkey business ready and waiting for investors to begin building it in strategic areas.

  1. Disadvantage: The High Fees

There is a fee for investing in franchises and ongoing fees you will have to pay to the franchiser. These fees are typically high with fixed costs every month or year just for using their brand name!

  1. Disadvantage: Not Much Freedom

With a franchise, you don’t have any freedom to change its product line, nor can you change things in the franchise system or even the store décor. A franchise is restrictive and you’ll have to be willing to follow the rules to protect your license and prevent losing it.

Wrapping It Up

When it comes to comparing franchises and startups, the decision depends on your individual preferences.

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