For anyone embarking on the journey to entrepreneurship, the numerous options for owning a business may seem overwhelming. Should you start your own company? Should you buy an independent small business, such as a local “mom-and-pop”? Should you buy a franchise, and if so, which one? Choosing the option that will lead to success requires thorough research and an honest self-analysis, including personal considerations such as your tolerance for risk and goals for business ownership.

While buying an independent business may be the right choice for some, franchising is almost always the better choice. Here are a few reasons why:

  • Brand recognition. Franchises have an established, recognized brand that has been carefully developed and proven to be capable of succeeding in the marketplace. Therefore, new franchise units will have customers as soon as they open, providing new franchise owners with a powerful base from which to grow their businesses. Independent small businesses rarely enjoy such strong brand awareness, and often, their existing customers’ loyalty may waver upon learning that new owners have taken charge. 
  • Established operating systems. In order to ensure that customers have a consistent experience from unit to unit, franchises have proven systems in place that dictate everything from employee uniforms to specific methods for creating products or delivering services to customer service standards. As a new franchise owner, these systems will take the guesswork out of how to successfully run your business. On the other hand, when you purchase an independent business, the previous owners may share with you some of their secrets for success, but their methods are typically not as specific and easy to replicate as those of a franchise—leaving room for error as you try to meet customers’ expectations. 
  • Ongoing, reliable support. The great franchises provide new franchisees with training and support starting from when they buy the franchise and continuing for the duration of their ownership. The company will train you and your staff, provide marketing and advertising services to help you attract and retain customers, and may offer other forms of ongoing support, such as HR services. This strong support system will reduce your risk as a business owner by helping you navigate and overcome common obstacles to success. On the contrary, independent small business owners generally do not have the time and resources to offer continuous support after selling their businesses. 
  • Access to detailed information about the company. Franchise parent companies are legally obligated to provide potential franchisees with certain information through the Franchise Disclosure Document (FDD). The purpose of this document is to protect buyers by equipping them with the information they need to weigh the potential risks and benefits of each opportunity. The Federal Trade Commission (FTC) requires the FDD to be written in plain English, free of legal jargon, and delivered to prospective franchisees at least fourteen days before they would sign their franchise agreement. This document contains information such as the history of the parent company (including bankruptcies and involvements in litigation), financial statements, key employees, rules and restrictions placed on franchisees, obligations on their part to each franchisee, audited financials and much more. By contrast, small businesses are typically not required to make such disclosures—the burden is entirely on the prospective buyer to investigate the business, and it may be difficult to uncover all of the details needed to make a well-informed purchase decision.

Given the strong support, proven systems, established brands, and access to information that franchises provide, it is not surprising that an estimated 90 percent of franchise operations are in business for ten or more years—a far more favorable statistic than most other small businesses have. Are you considering franchise ownership as a path to escape corporate America? Contact Franchise Logic at 303-805-5078 to schedule a free, no-obligation consultation today!

(Sources: https://www.entrepreneur.com/article/181212, https://www.thebalance.com/the-franchise-disclosure-document-fdd-1350608).

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