The Big Question: Self-Employed or a Franchise Business?
Joel Caws - Technical Director, Select Your Franchise
Many people who are out of work or considering a change look at the work-for-yourself option but I’ve noticed a question that pops up time and time again: “Whats the best option for me? Self-employment or buy a franchise?” (If you don’t already know what a franchise is then see this helpful posting on definition of a franchise.)
Both options do represent a way of working for yourself since whether you build a business based on your own idea or buy a franchise opportunity, you will still effectively own the company and be responsible for whether it succeeds or fails. So here are some of the main differences:-
Self-Employment
Pros
- All income is yours to administer.
- You get to work to your own ideas and find a structure that works for you.
- Satisfaction in knowing you are building a business for yourself, in your own way.
Cons
- Its known that self-employment in the UK has a high failure rate with around 4 out of 5 businesses failing within 3 years.
- You will be building a brand and reputation from scratch.
A Franchise Opportunity
Pros
- The NatWest/BFA annual survey consistently finds around 90% of UK franchisees are trading profitably in any given year.
- You are working to a business formula that should have been tried and tested by a franchisor.
- Most franchisors provide training and support backup.
- The franchise may have established branding and reputation which you might benefit from.
Cons
- There will usually be an upfront franchise fee to cover setup and training costs.
- The majority of franchises charge ongoing franchise management fees (usually a percentage of turnover or profit) which covers ongoing training and support.
- You will usually have a contractual attachment to the franchisor for as long as you run the franchise business.
These are really just the main points as there are others. The next post in this series looks at the type of people who might be most effective for the self-employed or franchise business options: The Big Question: Self-Employed or a Franchise Business Part 2
Tags: franchise business, franchise opportunities, joel caws, pros and cons, Self employment, start-ups
March 5th, 2010 at 2:40 pm
Good short summary of the differences between self-employment and owning a franchise. In my view the chances of success are greater for a franchise, but the costs will most probably be higher. One must also play by the rules of the franchiser. Thinking through what you really want and how you will be the happiest. One should enjoy their work.
March 10th, 2010 at 1:38 pm
@Don
Some good points Don. Work enjoyment is what keeps you sticking at it so it does indeed help if pick an industry or business that you like to work in. Really its about careful thinking things through before you make the leap.
Joe