Franchising Vs. Starting Your Own Business

Individuals looking to start small businesses may also consider franchising opportunities. A franchise agreement allows a business owner to use the name, likeness and products of an existing business chain. Both starting a new business and opening a franchise both carry specific advantages and disadvantages.

Advantages of Franchising

o     Buying a franchise allows a company owner to use an already successful corporate model and product, rather than coming up with her own for a new business. Additionally, franchise owners receive support and guidance from the "franchisor," or parent company, in the opening and operation of their business. Also, many franchisors provide start-up financing for business owners who purchase franchises. According to the International Franchise Association, franchises also have a higher long-term success rate than independent businesses.

Disadvantages of Franchising

o     A business starter gives up some freedom when deciding to open up a franchise because the franchisor dictates the business' look, name, product lines and prices. Business owners must pay franchisors royalties and licensing fees for the rights to use the parent company's business model. Additionally, a franchisor grants a business owner the right to use the franchise's name, likeness and products for a limited period of time--typically 10 to 15 years. The franchisor (parent company) can terminate the agreement allowing a business to retain rights to the franchise's name, likeness and products after the 10-year to 15-year agreement expires.

Advantages of Starting Own Business

o     An individual who starts his own business has total freedom and control over its operations, image and finances. An owner can set prices, design logos and develop products without input from an outside source. Additionally, unlike with a franchise, an independent business owner does not need to pay fees, sales percentages or royalties to a franchisor or parent company; he can keep his business' profits to himself, invest them back into his company or distribute them among his employees, investors or directors.

Disadvantages of Starting Own Business

o     An individual starting an independent business must come up with start-up financing on her own, without the help of a franchisor or parent company. Additionally, an owner of an independent business must build her new company's brand awareness from scratch, rather than using a proven, existing name and model. Independent businesses also face significantly higher failure rates than franchises, typically due to the need to invent and market new, unproven ideas to an untapped consumer base.

There are advantage and disadvantages on franchise system, but you the one who make the decision which one better and suitable with you and your business type. But before you involve in this business you must make a research on the franchisor history and background. if  you can excess their financial report it is much better rather then from recommendation.