There are few countries in the world where virtually anyone can be a business owner. For instance, the U.K. is a nation that attracts entrepreneurs because it’s one of the few places where owning a business is within reach for many people.

Most of today’s new businesses are small startups. But another popular option is a franchise. Successful brands use franchise programs to expand their market presence without taking on all the responsibility of operating a new location. The franchisee is the owner and operator of their location, however it’s a joint venture with the franchisor.

In recent years franchise opportunities have exploded. What was once a fast food business model is now finding its way into numerous industries. Top programs in the U.S. now include SportsClips and the UPS store franchise.

The growth of franchise operations has more entrepreneurs asking, what are the key differences between owning a startup from scratch versus a franchise?

CONTROL/DECISION MAKING

Startup From Scratch

There’s no way to have more control over your business than by launching an independent startup. You’re the president, CEO, manager and all-around shot caller. With that power comes a lot of responsibility. You’ll be able to direct your company exactly where you want it to go, but you may be treading uncharted waters that don’t pan out.

Franchise

When you open a franchise you’re stepping into an established business. A lot of the groundwork is already laid out and decisions have already been made for you. If you prefer to have fewer decisions to worry about then a franchise may be more your speed. This is particularly true if you aren’t concerned about brand decisions.

CUSTOMER ACQUISITION

Startup From Scratch

Arguably one of the most difficult hurdles for a new startup is building a customer base. Without customers you have no revenue and no way of staying afloat financially. You have to put a comprehensive marketing plan in place before the launch to attract customers the moment you open your doors. New startups have to work hard to prove their merit and build a good reputation.

Franchise

Franchises offer the benefit of built-in brand recognition. People will already be familiar with the company and what it offers. Because it’s a recognized brand there’s an element of trust that helps new franchises with customer acquisition. As long as the franchise is in a high traffic area where they can be found by the target market customers should walk through the door.

COST/EXPENSES

Startup From Scratch

For most hopeful entrepreneurs little to no capital is the barrier preventing them from launching a business. But it doesn’t have to be. With the advent of the internet, the cost to launch an online business is relatively low. You may have to get creative and start very small to launch a lean startup. Another factor to consider is accurate budgeting. It’s easy for new business owners to miscalculate initial operating costs. It’s advisable to add a 10-20% contingency to your estimates.

Franchise

With a franchise, many of the startup costs are very straightforward, which helps with valuation and projecting profit. However, it often takes a fair amount of funds to open a franchise store. It all depends on the franchise that you choose. At Dominos you can potentially start a franchise for $0 if you’ve previously managed a store. But, entrepreneurs should consider that there is an annual fee that must be paid to continue operating as a franchise and using the company’s brand.

RISK

Startup From Scratch

All business ventures come with some level of risk. Entrepreneurs are people who aren’t afraid to roll the dice and take a chance on their ideas. The best a startup can do is heavily research their market in advance. The more you know about demand, competitors and your target market the more you can mitigate the risk.

Franchise

A franchise tends to be a little less risky than a startup from scratch. You’re already working off of a proven business model and customers are easier to come by. These advantages give franchises a higher success rate compared to startups. That’s not to say there’s no risk to opening a franchise. One of the biggest factors is the location of the storefront. Some spots will be a safer bet than others.

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