Standalone or franchise?

Richard Pakey of Lime Licensing Group examines the differences between these two distinctly contrasting business options.

Standalone or franchise?

Richard Pakey of Lime Licensing Group examines the differences between these two distinctly contrasting business options.

One of the most common mistakes any prospective business owner makes is not to understand the difference between a franchise opportunity and a standalone venture. They are definitely two very different animals. Research carried out by NatWest reports that the success rate of franchise businesses is greater than 90%, compared to independent businesses which currently stand as low as 20%. 

I’m sure these figures will surprise you, but please do not assume that if you choose to either buy or start an independent business, then you are doomed to fail. However, these stark statistics do tell a story and are often the result of people making wrong choices early on. But if you are fiercely independent, and successful at it, then taking the franchising route may be the wrong fit for you. Yet, from a purely economic and monetary position, franchising does appear to be the most appealing option for any prospective new business owner. But before making your decision, here are a few pointers to consider:

Why franchising works?

One of the reasons why franchising is a strong option for starting a business is that someone before you has taken the majority of the risks. They’ve made good decisions, possibly some bad ones too, but have emerged from the other side intact. They have discovered a formula that works, so you can purchase an already tried and trusted business model. You will not need to reinvent the wheel, which in itself can have time and financial implications for any new business owner. Franchising also offers a community to advise and support you, throughout your time in business but is particularly beneficial during those early days of uncertainty. Although you are effectively paying for the privilege in ongoing fees, which are covered in your franchising terms, you should not have to spend extra money seeking advice, which would happen if you were on your own.

That said, there are still many challenges to overcome. You will need to consider the advantages and disadvantages before taking that first step into the unknown, and you must be prepared to build your business from a low starting position – which requires plenty of hard work, long hours of graft and in many cases a sizeable outlay of cash. And there are numerous administrative duties to undertake too, which are usually completed outside of the normal working hours. This will affect your ability to scale up, if that’s your future ambition.

Best time to start a business?

The year 2020 has been a difficult and stressful time for most business owners, so let’s hope Covid-19 is a once in a generation issue. Many people say you should never start a business when the economy is reeling, but I have developed a few during such periods. Most of these companies have gone on to grow into successful entities so, like many things in life, it’s never a case of ‘one size fits all’. My advice is to start a business when the time is right for you and that may depend on a number of factors, such as your psychological state, or your lifestyle needs or your own employment status.

Going alone?

Whether you choose the independent route, or opt to purchase a franchise, running a business is both fascinating and largely rewarding. However, at the same time, mistakes can cost you dearly. I have known people who have injected all of their collateral into a new project and lost the lot. Looking back on their dreadful experiences, they can usually identify one particular point when they could and should have minimised the risks – but failed to do so. But hindsight is often meaningless if there’s no opportunity to salvage any part of your business. Therefore, always attempt to make measured and calculated decisions. Do your research and seek professional advice which could end up being the best investment decision you ever made. And it shouldn’t cost the earth.

One final point

Please remember you do have options. I have been there myself and have experienced building up businesses in both camps. I have developed brand new businesses from scratch, as well as using the tried and trusted franchise format. I now know what I would, and wouldn’t, do again. But whatever option you choose, you must do what’s right for you. Seek the expert opinion of others and then make an informed decision. Your own gut feeling is usually the correct one. The best time to do something may have been years ago, but the second best time is right now. Good luck and I hope this article has given you some ‘food for thought’.

ABOUT THE AUTHOR
Richard Pakey
Richard Pakey
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