The Pros and Cons of Independent Business Ownership vs. Franchising

Over 5.5 million private sector businesses operate in the United Kingdom,

but if you want to run your own business, you’ll need to decide whether you want to:

• Start your own business, or

• Operate a franchise

Franchises offer you a blueprint to success that you can follow. However, you lose some freedom to choose how you operate your entity and what you can offer, and franchisors demand a fee to use the company’s business model and trademarks.

If you’re starting your own business in the UK, knowing the pros and cons of an independent company vs a franchise will help you make the right choice for your unique situation.

The Pros and Cons of Starting Your Own Business

Starting a business from scratch is rewarding. You put in the hard work, create a business plan and will always remember your first sale. Operating a non-franchise puts you in full control.

Success and failure are dependent on you. Each path, whether you choose to buy a franchise or not, has its advantages and disadvantages.

The Advantages 

Some of the perks of starting up your own business include:

You’re in Control 

Every aspect of your startup is up to you. You’ll make all of the decisions on:

• Pricing
• Workflows
• Procedures 
• Marketing
• Hiring
• Operational hours

Franchisees give up much of this control because the franchisor requires them to follow their business model. If you want to make drastic changes to your business and forge your own path, being independent is the right choice.

Financial Rewards

Independent businesses are free from paying fees to franchisors. You can earn as much money as you can make, and aside from expenses, the profits are left to you. Financially, you can scale the company to reap more profits and reinvest the profits as you see fit. 

Flexibility

Work as often as you like. You’re in control, so you can opt to work one hour a day or ten hours a day. It’s up to you. Many entrepreneurs pursue business ventures because of the flexibility it gives them to live the life that they always imagined.

The Disadvantages

Even if you are a successful business owner, there are some disadvantages that you’ll experience that you wouldn’t when buying a franchise.

Unproven Plan

Independent businesses close every day. Some are viable and others are not, but with the right plan in place, many could have succeeded. Ownership comes with a lot of unknowns, and 2024 closures hit a 20-year high of 198,000+ companies closing.

Franchisees follow a proven plan, but as an independent owner, you have to refine your plan and evolve to remain open.

Lack of Branding

Your brand is unknown. As a new business owner, it’s up to you to focus on advertising, marketing and social media and creating a brand that people trust. Building a brand takes time, and it’s imperative that you continue to offer a great product or service and focus on support to maintain a positive image.

Higher Risks

An unproven plan and lack of branding come with higher inherent risks to you, the owner. You have to put an immense amount of time and resources into something that may not work in the long run. 

If you’re failing, you won’t have a franchisor to fall back on to assist you.

Starting your own business in the UK is a lot of work, and while millions of people succeed, others prefer the franchise model. 

The Pros and Cons of Buying a Franchise

Startup businesses certainly have advantages, but franchises also bring several benefits to the table, particularly for first-time business owners. 

The Advantages 

There are several benefits of buying a franchise, including:

An Established Brand and Marketing Plan

When you buy a franchise, you also buy an established brand and a built-in audience. Franchises are well-known and recognised names throughout the UK, which gives you a competitive advantage. After all, building a brand is half the battle when launching a new business.

When you buy a franchise, however, you:

• Automatically gain the trust of your target market
• Reap the benefits of strong brand awareness
• Receive marketing plans and support

Franchise owners are often given access to digital marketing resources, such as content marketing guidelines, email marketing templates, social media strategies and more. Training and resources may also be available to help owners maintain brand consistency.

When you build a business, you must go through the process of building your brand and marketing plan from the ground up.

Helpful Resources and Guidance

Franchise owners gain access to helpful resources and guidance on how to manage and promote their businesses, including:

• Operational guidance, such as standard operating procedures, brand standards, training programs, ongoing education support and more.
• Financial management support, such as budget guidance, performance tracking and more.
• Training and ongoing support, such as initial training programs, access to support teams, performance evaluations and more.

The assistance and support provided help franchise owners avoid pitfalls and mistakes that can cause startups to fail.

Franchise owners typically have an easier time securing financing as well. Lenders are often more inclined to approve loans for franchises because they already have proven business models and an established market.

Higher Success Rate

Perhaps one of the biggest advantages of buying into a franchise is the high success rate.

According to a survey from the British Franchise Journal, the rate of failure for franchises in the UK is just 0.5%. New businesses, on the other hand, have a failure rate of 50% within their first three years of operation.

The high success rate is likely attributed to the guidance, support and built-in brand awareness that franchises offer.

Running a successful business is challenging. It requires a solid plan, the willingness to adapt as things change and a firm understanding of the best practices for running a business. That’s why launching a startup is often fraught with risk. There are many uncertainties, and without good business acumen, the venture may fail.

Franchises help level the playing field by offering owners access to established brands with a history of success. 

The Disadvantages

While franchises offer a wealth of advantages, there are some potential drawbacks that should be considered, including:

Less Flexibility and Room for Creativity

The very things that make franchises so attractive – established brands, support and guidance – also limit your creativity and flexibility.

• Franchise owners must adhere to brand standards and guidelines in order to stay operational. 
• You cannot launch your own unique products or services. 
• Marketing campaigns must typically be uniform across the board.

Some business owners may find this aspect of owning a franchise to be stifling. 

Higher Initial Costs and Ongoing Expenses

The upfront cost of buying a franchise can prove to be a challenge for small business owners. Financing options are available, but there’s no guarantee of approval.

Franchise owners are also responsible for certain ongoing expenses that an independent business owner wouldn’t normally incur, such as royalties, training fees and advertising fees.

Franchise Vs Startup: Which One is Right for You?

Should you buy a franchise or start your own business? Ultimately, it comes down to your goals, preferences and finances.

There are several factors that should be considered before making your decision. Having guidance and advice from a professional business coach can make all the difference in making an informed decision.

Speak with an advisor today to see if ActionCOACH may be the right fit for you.