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Franchising vs. independent business: 6 things you need to know before investing

Take the guesswork out of your decision: here are the six most important things to consider when you’re thinking of starting a traditional business or buying into a franchise brand.

Starting a business is a major life decision, one fraught with risks and rewards. You can choose to start from scratch, buy an existing business, or buy into a proven franchise. But how do you know which one is right for you? Are you a person who craves independence and the creative freedom to be their own boss? Would you rather follow a ready-made system with proven results? 

We’ve taken a look at the six most important things to consider when you’re thinking of starting  a traditional business or buying into a franchise, which will hopefully take a lot of the guesswork out of your decision so you can make the choice that is best for you. 

Austin 1Know What You're Investing In

Anyone can start a business, but not everyone can make a successful business. If you decide to open your own independent business, you need to understand that you may think you are an expert in your product, but your potential customers do not. It will take time to build a name for yourself, and trust from your clients. If you do a good job, it will come.  

If you choose to buy a franchise, that trust is already there. Franchising allows investment into a proven brand. 

Brand Awareness

Think of some restaurant logos that you’d recognize even without their brand name: McDonalds’ golden arches, Subway’s yellow and green arrows, Pizza Hut’s red roof. Whether it’s in San Francisco or San Antonio, customers know they will get the same meal at each of these, because of the franchise proposition of uniformity. Customers seek familiarity and reliability, which these brands have established, sometimes over decades of time. 

Brand awareness is something that can only be established through time, which can be hard when starting a traditional business. 

Startup Costs and Financing

Let’s face it: starting a business is going to cost you some serious Money with a capital M. Costs associated with starting a business are plentiful: renting or buying retail space, equipment and supplies, employees, insurance, and more. 

As your own independent business owner, you can set the budget, however small or large. But unless you’re King Midas or an heir to a diamond mine, you may have to secure a loan of some sort. If you’re new in the business, it may be harder to secure loans or low interest rates from financial institutions wary of investing into an unknown.

The cost of buying into a proven franchise will almost certainly be more than starting your own independent business. But remember: you’re not only purchasing a franchise, you’re purchasing the name recognition that goes with it. That name doesn’t just mean brand awareness to customers; it can also mean brand awareness to financial institutions. Depending on the franchise, some may not require a brick-and-mortar space, or other start-up costs, giving it lower overhead costs and a faster turnaround of profits. 

Legal, Financial & Tax Implications

No one wants to think about the legal stuff associated with a business, but it’s important. From permits and licenses, to insurance and tax exemptions, these are all real issues to consider. Whether independent or a franchise owner, make sure you have a smart lawyer on your team who can sift through the legal jargon that most of us glaze over reading after a page and a half. 

If you own independently, make sure everything you do is by the book (pleading ignorance is usually not a great defense in court). This will mean extra work hunting down the information you need, but incredibly necessary. 

A franchisee, however, does have a bit of legal protection by virtue of belonging to a larger organization. A lot of information is already out there, as franchisors are required by law to disclose certain information about their business in federal and state regulated documents. And if there were to be any legal trouble, the parent company will offer franchise support through those issues. 

Your Operations Support Systems

With your own independent business, your slogan can be like Truman’s: “The Buck Stops Here.” You are in charge of it all, from hiring and firing, to marketing and sales, payroll, and everything in-between. Creative individuals love the freedom to make all of the decisions for their own business. 

As a franchise owner, yes, you may be the boss of your own business, but you’ve signed an agreement to follow the franchise company’s rules. But that also means you don’t have to do it all on your own. Some companies offer franchise support, including security technology support, training for owners and key personnel, dispatch services, vendor information, and field operations training. 

Getting the Word Out Through Marketing and Sales

One of the last pieces to put in place for your business is marketing and sales. You may have a great product, but how are customers going to know about it? 

If you are an independent business owner, you have absolute control: starting with your slogan and logo, then moving on to your advertising budget and where to market your product, from billboards and television campaigns, to Facebook ads and Google Adword campaigns. You can choose how much or how little you can afford to spend on marketing to bring the customers to you. 

As a franchisee, a lot of those creative decisions are out of your hands. On the plus side, many franchisors have teams that handle that stuff for you, such as sales support, lead generation and telemarketing, sales coaching, strategic partnerships, and marketing support. The franchisor will do the heavy lifting so you can focus on day-to-day operations.

Your Choice

There are many things to consider when starting your own business. If opening your own private security Signal 88 franchise sounds like it may be the perfect fit for you, we’d love to talk with you and set you up for success. 

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