Franchising vs. Starting Your Own Company From Scratch
In this article, we will be discussing something really basic when we talk about Franchising 101: Why a franchise:? Why can’t I just do this myself?
We are going to talk about some of the reasons why someone would want to go into a franchise versus starting something on their own and vice versa. So why should you consider looking at a franchise rather than starting your own business from scratch?
The main thing to consider is that franchises offer a proven system across the board. They have perfected (as much as possible) every little aspect of their business – whether that is how to make a hamburger, the ingredients they use for it, how to put the toppings on, or whatever else it might be.
They have had their businesses in existence, have run them for at least a couple of years, have more than one location, and have proven concepts – whether they are in the food industry, the retail space, or anything else. That knowledge allows them to trim that business model into a franchise.
That is where some of the infrastructure and support mechanisms that set franchises apart from startups come into play. Here are some of the things you should think about…
Let’s start off with an example. In one well-known lawncare franchise, owners get their vehicles cheaper than a dealer does straight from the manufacturer. That is not the case with startups. Let’s say I want to start “Tim’s Pool Company.” If I need a pickup truck, I have to go right to the dealer and I have to pay whatever price the dealer will allow me to negotiate.
Now, if I am part of a franchise system, I am going to get that truck for less. I am going to get it wrapped for less, and I am going to get the equipment for less. Why? Because of buying power. Even a small system is going to have more buying power compared with just going out and starting a business yourself.
The same thing applies if I am starting “Tim’s Sandwich Shop.” Let’s say I make a mean ham sandwich and I know I can replicate it for customers. There are still plenty of questions to answer. For example, where do I get the napkins? How do I know if I am paying a good price for those napkins? How do I know they are high quality? I have to figure all of that out.
But if I am the franchisee of Subway (or any food franchise), those dilemmas are already solved for me. I will know where to get the napkins, the cups, and the straws – those are all part of the franchise system, and therefore I will be able to get them for less.
So what does that mean for my bottom line? Well, instead of spending $100 on a pack of napkins, I spent $75. Let’s extrapolate that out over a week, a month, or a year and think about what it is doing to the bottom line – especially when we start stacking that on everything else within that system.
It all boils down to buying power: the power of knowing where I am going, what I am getting, and that I am getting it for the best rate. That is one thing to think about.
If you have seen the movie The Founder (2016), which is about the McDonald brothers, there is an excellent scene that shows them discussing exactly how to put the pickles, the mustard, the ketchup, etc. onto each hamburger. Now let’s return to our previous example. If you are starting a sandwich shop from scratch, you are going to have to figure out for yourself the best way to slice the tomatoes.
You will need to figure out how you are doing that. How are you going to make sure that every time somebody gets a sandwich with a tomato on it, it is sliced exactly the same way?
Not only do you need to establish the tomato-slicing process, but you will also have to create a training program for every new employee that comes on board so that it is always done according to your shop’s standards.
With a franchise, those processes are already laid out for you. You do not have to figure out how to do it or how to train people to do it. And often, there are things that the franchisor is going to do for you from a training perspective.
You might take an initial employee with you to the onboarding and initial franchisee training. But what about down the road? Franchises are going to have some form of training in place for every new employee you bring on. Yes, you will be overseeing it, but you don’t have to put a stop to all the other responsibilities of being an owner (networking, building the business, etc.) to stop and train every new employee you hire. You will already have the systems and support in place.
Now let’s say that you need to hire somebody. Most people, by the time they are looking at franchise ownership, have had some experience managing or hiring people. But almost everyone we work at FranCoach with starts a franchise in an area they have little to no experience with. That means they are going to have little to no experience in hiring for those roles.
If I start Tim’s Sandwich Shop from scratch, I will need a manager, a sandwich artist, and all kinds of different positions. I need to figure out how to find them. I will have to write job descriptions. Then I will need to figure out where to post the job. Should it go up on Indeed, Glassdoor, LinkedIn, or ZipRecruiter? How do I do that? How much will it cost?
As the applicants come in, how do I manage that? Do I respond right away? Should I conduct an initial screening? What about a phone interview? Do I bring them into the location in person? What questions do I ask? You get the picture.
The franchisor, on the other hand, will be able to provide you with the job descriptions for Position 1, Position 2, Position 3, etc. And they will tell you where to post them. The franchisor will also have software to help you aggregate and screen employees, and you will be able to access that for a much lower cost.
They will give you all kinds of helpful information. For instance, when you interview, they will give you a list of the things you should be asking. They will inform you about the types of answers you want to hear.
And if you get all the way to the end of the hiring process and are choosing between two candidates, many franchises will have a person dedicated specifically to you to talk to them both and serve as that final interview. Ultimately, hiring decisions are your choice as an owner, but the franchise can check your work to make sure nothing gets missed along the way.
If you started a business from scratch, you wouldn’t have any of that.
When you think of getting the business up and running, all of these things are heavy at the beginning. They then continue as an ongoing form of support. Ok, great, but what next?
Here is a good rule of thumb: when you own a business, you want customers. So how are you going to get them? Well, you need a website. Maybe your thought process goes something like this: “I am pretty tech-savvy, I can go to GoDaddy, Wix, or Squarespace. I can create this awesome website that is going to be roughly equivalent to what my nine-year-old could have built.” Awesome.
But is it mobile-friendly? How are we on SEO? What about keywords? What is the user experience like? What does it look like on the backend? How do we adjust that as things change over time? Maybe you nail it with those things… but maybe not.
And what about advertising? That is just a website – what about the marketing to get people onto that site, to make your phone ring, or to come in? Have you thought about SEO? Pay-per-click?
SEO and Advertising
You would be surprised how many people I say “SEO” to and they do not know what that means. Even if you do know that SEO stands for “search engine optimization,” do you know how to do it? If not, who are you outsourcing that work to?
There are a million and one companies out there that claim they can do SEO and social media. But those are no small feats. So you need to make sure you are contracting with the right people and hiring the right company to figure out what your marketing needs to look like and then put it in place. And even so, you won’t see effects from that for months. So if it is not working, now you went and wasted a bunch of money and you need to regroup.
So what is the difference with a franchise? Again, it is the proven system. They are going to know what you need to do. They will tell you what their marketing looks like and they are going to have a lot of that done for you. They will tell you who to contract with, and some will even offer these services in-house.
Yes, you are going to spend money on that, but they are going to explain to you how much money you need to spend for X amount of revenue. If you want to hit a given goal, you need to spend X dollars on marketing. The franchisor will lay it all out for you.
When you have your own startup, you can get hung up on things as simple as creating a logo. That is not an easy thing to do. Does it look good? Does someone else already have it? Does it say the name of the company? What about merch? You will need to have some cool merch available.
You have to have all of these things in place, and if you are starting something from scratch, you have to figure all of that out yourself. Then you test it for three to six months, sometimes even longer, before you can possibly know if it is not working.
The franchise has all of those things in place for you to help you create that business. You can take the marketing even further. Some franchises might do direct mail, and there might be trade shows you can attend – and you are going to get all of these things for a lower price point.
That is the impact of buying power within the overall franchise system versus just an individual starting Tim’s Sandwich Shop, thinking you are going to compete in SEO with Subway, Firehouse, and Jimmy John’s.
If you think your startup is going to be at the top of Google, I hate to break it to you – it is not. You are not going to spend more than proven and trusted franchisors, people. How are you going to do that?
If you Google something like “sandwich place near me,” how many people are actually going to get to page two? The statistics on that are staggering – 92% of users never look past the first page of Google. The franchise, on the other hand, is going to have those SEO rankings in place. They are going to be constantly looking at the Google algorithms to make sure their franchisees are on the top of Google’s results pages in their local markets.
Starting Your Own Business
When it comes to business ownership, some people have the mindset that “I know it is going to be difficult, I know it is going to be challenging, but I want to do this myself. I don’t care about your system, and I don’t want to hear about your success.”
There is a certain level of arrogance or ignorance that comes with that. As somebody who started something from scratch, it is possible that I fall into one of those two buckets. But I have also been a franchise owner, and I know by far which option (a startup versus a franchise) is easier to follow and create.
Those are some of the things that I want people to think about when they are considering starting their own business from scratch. All the time, I hear things like “I can create my own landscaping business, I can create my own sandwich shop, I can create my own…”
Yes, you can. But is it really the best business decision you could be making?
These are just a snapshot of some of the things you need to think about. You will need to create them, hope they work, and ultimately perfect and replicate them when you start something from scratch.
With a franchise, all of these things are tried and tested – and you have a team of people within the franchise who are constantly ensuring these are improved and updated over time.
Is Franchise Ownership the Right Path for You?
So does that mean starting a franchise is definitely right for you? Of course not. Maybe starting your own business is right for you, or maybe not starting anything is right for you. The whole goal of our process is to properly educate people on franchise ownership to determine IF this is the path for them. It may not be, and that is okay.
When you think about starting from scratch or owning a franchise, franchising is not always right. Some people want that overwhelming challenge of doing it themselves. That is okay.
No matter which option you are leaning toward, hopefully this article gives you an idea of some of the things you need to consider and some of the things that will already be in place with a franchise.
One last item to think about: Once we do the process of getting you hooked up with two or three different franchises and you go through the 6-8 week Discovery Process with them, you will end up attending what’s called “Meet the Team Day” or “Discovery Day” (the terms are interchangeable).
And every single person who goes there, no matter how much they have learned, comes out of there with their heads spinning from all the information and the levels and the depth of support from the franchise they are talking to.
They are often absolutely overwhelmed with support, even in smaller, newer franchises. That is the level of support you are going to have. At the core, that is why you would choose a franchise instead of starting something from scratch.
If you are looking for more information about whether or not franchising is right for you, get in touch with us today. We are always excited to talk with prospective franchise owners about this journey and all of its many benefits.
Who Are We Anyway?
FranCoach is a national search firm dedicated to working with individuals who are interested in owning a franchise. We've partnered with over 600 of the top franchisors in the country, spanning nearly 70 industries.
Our number one goal with our clients is to help them find the absolute best franchise for them to own. Our goal with our Franchising 101 podcast series and this series of informational articles is to help educate people on all aspects of franchise ownership.
Reach out to us to learn more about potentially becoming a franchise owner. There’s never any fee for our service, so why not take the first step today toward your better tomorrow?