Why Choose a Franchise over a Start-Up?
By David Rhodes

This is a million-dollar question that many future and current business owners should consider. Owning a business requires dedication, a strong desire to succeed and the financial backing to endure seasonal lows. Of course, there are many other variables to consider when realizing a vision to become financially independent or to diversify one’s portfolio.

Money seems to be the root of all business transactions. The no-money down concept never worked for anyone I know. In fact, when going into business, one must be able to anticipate the start-up and ongoing cost. How does one do this without an MBA? Have you seen the spreadsheets in a business plan? It’s like studying Mandarin Chinese and being barely able to write a grammatically correct sentence in English–imagine that!

This brings me to my first point: a franchisor should be able to paint a clear picture like coloring by numbers back in grammar school. Unlike start-ups, where one has to devise the best hypothesis, research every aspect of the business, and, hopefully, find a mentor; franchisors should provide a “plug and play system”.

Speaking of research, one can spend countless hours researching an industry, business models, locations, product, accounting, regulations, etc. If entering into a hot industry in which one lacks experience, where does the opportunity to gain the necessary skills come from? Other questions then follow--Who trains the owners on how to train the staff? Who sets up the payroll, negotiates the lease, or even designs and places ads that will be effective marketing and pr tools? Did I mention inventory, point of purchase sales, accounting–ok, enough already!
Franchisors are either growing or dying, so look for a company that is experiencing growth and is able to supply ongoing training and support. A small chain experiencing high growth will focus on the franchisee, like a parent rearing a child. Franchisors’ number one interest should be focused on the franchisee’s success.

When buying a franchise, one should expect a fully operational concept that will supply answers and direction to every aspect of the business. Statistics demonstrate that franchisees have a greater opportunity to succeed. Start-ups have a 70 to 80 percent chance of NOT surviving the first few critical years while franchisees have an 80 percent chance of surviving (statistic from the Small Business Administration).

I know folks that live life like a cow in the pasture, watching life go by. Others are like the rhino and charge forward! I have heard countless folks say, “If I only would have …”

Remember when Fred Delucca of Subway was selling franchises for $5,000? How many people wish they had signed up back then? I know at least one. My dad repeats the story of his almost-Subway success with such passion as if he doesn’t remember telling me before. In fact, I am now able to recite the same story verbatim. It starts out like this ...” Son, I almost opened a Subway,” and it ends up with the same reply as I lower my chin, grit my lips and shake my head. . . .” Yep, almost Dad”

Of course it takes research, foresight and more research when selecting the appropriate franchise, but a hot concept coupled with demand for the product is like buying Microsoft stock 20 years ago.

Although I am not totally opposed to start-ups, I believe the odds for success are much higher when opting to buy into proven success. Going into a start-up requires a general knowledge of all facets of business. One is able to get the knowledge needed to operate a start-up; however; it usually costs tuition fees from the School of Hard Knocks.

For example, the carpenter becomes the contractor, the accountant starts an accounting firm, and the cook opens a restaurant--all owners of a start-up. They tend to believe the fatal assumption, that just because they know the “job,” they understand how to grow a business. As important as technical knowledge is, it is not enough.

As always, be careful when making any move in business. As you already know, there are snake-infested waters in every aspect of life. Just remember that any franchise opportunity needs to be investigated carefully. Although there are no guarantees in life, the benefits of opening a franchise can be much less risky than going it alone.

David Rhodes is a VP of Business Development. If you would like to talk with David about any of the information contained in this article, or if you would like more information about franchise opportunities, contact David at 616-482-9836 or e-mail rhodes@wingheavenrestaurant.com.