Franchise vs Starting Your Own Business A Costly Investment Decision

Investors want to have a large portfolio of investments to secure their future. There are a lot of options to choose from, and this means making difficult decisions with your money. One decision that investors might come across, if they’re entrepreneurial-inspired, is whether or not to buy a franchise or start their own business.

It’s a major decision to make.

An entrepreneur may find glory, passion and dedication in starting their own business from the ground up. There’s a personal battle taking place with a business, and when the business is entirely yours, its fate is in your complete control.

But what about a franchise? You’ll own the business, but you still have to worry about:

  • Royalty fees
  • Start-up costs
  • Lack of financing
  • Hefty material costs

The idea of a franchise, from an investment standpoint, may be the better option.

Franchises Follow a Proven Business Model

Franchises are given everything they need to succeed. You’ll be able to grow your business with:

  • A brand people trust
  • Marketing that may be on a national scale
  • Support from the franchisor
  • Oversight from the franchisor

Your hand is held the entire time to make sure that you make money.

Let’s use pizza parlors as an example. Did you know that the majority of pizza shops are owned by large chains? But local pizza parlors often make just enough money to keep the lights on. A lot of the owners make $60,000 or less per year.

But what if you decided to open a Papa John’s? Well, there are $25,000 startup costs as well as a lot of financial requirements.

The good news is that the average store brings in $837,000 per year. Franchises have a large name, a standard of quality and a business model that customers trust.

While the initial investment is hefty, franchises have a much higher chance of success and profitability.

Training for Success

Mr. Rooter is a prime example of a smaller franchise that is still well-known and can be very profitable. Take Mr. Rooter Detroit as an example. As a franchise, there are the following fees:

  • $35,000 initial franchise fee
  • 5% – 7% royalty fee
  • 2% ad royalty fee

If your application is accepted, the company has relationships with lenders who offering financing. You’ll also be able to enjoy support for:

  • Grand openings
  • Email marketing
  • SEO
  • Regional advertising
  • Field options
  • Proprietary software
  • On-the-job training
  • Classroom training

These are just a few of the many benefits of owning a Mr. Rooter. Yes, you’ll spend extra money on the startup costs. You’ll also be able to use a nationwide brand name, use vendor discounts and learn a system that is proven to be successful.

Risks are lower with a franchise, but you so lose some control in the process.

Small businesses are always at risk of failure, but when the small business is a franchise that has a solid foundation, it has a higher chance of success. The potential for some franchises are higher than going into a new business that doesn’t have a name or brand recognition to build off of just yet.

David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.