If you’re debating whether to buy a franchise or an independent business, you’re certainly not alone.
Having been in the broking industry for many, many years, ABBA Group has encountered an endless number of clients asking for advice on this.
There is no one size fits all solution but there are some factors to consider that will help you make the right decision.
Franchise vs. independent business
There are similarities and differences between franchises and independent businesses.
Individuals who leave corporate jobs after spending years in them prefer franchises. This is because they’re used to working in a structured way knowing that tasks will be executed in a specific way. Individuals who also prefer some order and documented systems and processes tend to lean more towards franchises.
Individuals who like to do things their way and prefer to not be directed on what to do with their business will opt for an independent venture. There’s absolutely nothing wrong with either of the two – you just need to know where you fit best.
Franchise businesses can be found in a variety of industries so you can usually compare any type of independent business with a franchise one, ranging from tech to interior design to transport based ventures. You can compare the cash flow statements of the two businesses and objectively gauge their performances.
Some people choose to set up businesses and franchise them using independent franchisors. This option however is generally considered to be quite risky compared to buying an established franchise or buying an independent startup. However, presented with a decision between starting a business from scratch to franchise and starting an independent one, the franchise option would be the easiest and safest bet.
A franchisor will normally assume the duty of market surveying to establish the viability of setting up shop at your chosen location. They will also avail themselves to respond to any of your concerns, offer training while requiring regular reports.
When deciding between a franchise and an independent business, be sure to compare them using a similar set of financial records. In both cases, royalties and other expenses will be deducted from the income, allowing you to assess their adjusted cash flows.
Compared to an independent business, purchasing a franchise means that you’re buying a business from a proven franchise, and the franchise fee is recorded as an asset to your business. The franchiser will also protect your business, meaning they will not allow another franchisee to set up shop in your territory. An independent business will have most perks that come with a franchise except with barriers to entry.
So, to franchise or not?
Before you decide, check out ABBA Group’s business listings (both franchise and independent) on our website and contact us today to learn more from one of our friendly brokers.
