When considering new business ownership, one of the biggest decisions is whether to launch the company from scratch or purchase a franchise from a proven brand.
While both approaches offer opportunities for entrepreneurship, the business models differ substantially in terms of structure, autonomy, and support. If you have dreams or intentions of embarking on your own business ownership journey, it is important that you understand the differences between these two business models, then choose the structure that suits your needs best.
The following are some of the biggest differentiators between operating a franchise versus running an independent business:
Startup Costs
A key difference between a franchise and stand-alone business relates to start-up costs. When launching an independent business, owners generally possess a lesser understanding of their total initial investment. Due to common unknowns like supplier options, marketing expenses, equipment costs, and other expenditures, budgeting and financing can be more challenging as an independent business owner.
New franchisees possess greater insight into their upfront investment early on due to the discovery process and training provided by the franchisor. These startup costs include a Franchise Fee – generally a one-time payment to the franchisor in exchange for the right to operate under their brand and business model. Royalty payments kick in shortly after launch based on a percentage of the franchisee’s gross sales. For the most part, franchisees often have a greater understanding of both their initial investment and long-term costs involved in running their business.
Launching the Business
Getting a new business off the ground is a wonderful and rewarding feet, regardless of whether the company is a franchise or an independent enterprise. However, one of the biggest contrasts in these business models is in their launch approach. The onus is on independent business owners to plan and implement literally every detail of their start-up strategy. While this arguably affords stand-alone business owners more creativity and greater freedom than their franchisee counterparts, it also requires a much more substantial amount of effort, time, and guesswork.
One of the most appealing factors for many franchisees is access to a proven, streamlined, and well-defined launch process. The best franchisors develop comprehensive franchisee onboarding that includes operational guidelines, marketing resources, training, competitive insight, and numerous other assets. Franchisees also benefit from immediate name recognition and brand association due to the franchisor’s established position in the marketplace.
Addressing the Competition
The way franchisees and independent business owners approach competition is very different. Stand-alone business owners are generally not confined by contract nor covenant on where they can operate and compete. This affords them greater freedom related to location, adaptability, and other market dynamics.
In contrast, Franchisees are usually contractually designated to operate within a specific territory. While perhaps more limited in geographical scope than an independent business, the Franchisor has usually already researched and defined the market viability within each of its franchise territories.
Getting Support
The freedom of independent business ownership comes at a cost, particularly in securing support and insight when needed. Navigating business challenges can be time consuming and pricey, as these owners must first be adept enough to be able to identify their issues, then capable enough to secure the best solutions and resources to resolve them.
One of the greatest advantages of operating as a Franchisee is the built-in and comprehensive support offered throughout the franchise system. Franchisors provide start-up tools, operational guidance, ongoing training, technical assistance, marketing kits and countless other support programs. When faced with a challenge or concern, franchisees are a single phone call or email away from the answers they seek. Most franchises also have an accessible and eager network of fellow franchisees that offer guidance, support, and fellowship.
Looking at Success Rates
There are no guarantees in business, so it is important to consider the statistics surrounding longevity. According to Investopedia, approximately 25 percent of independent businesses shutter within the first year. Of those remaining, another 50 percent fail within five years and only 30 percent of those are still in business a decade later. These numbers are likely reflective of the speculative and often risky nature of launching a new and unproven business venture.
Franchises have a much higher overall success rate. A recent study by FranNet reported that 92 percent of franchises were still in business after two years in business and 85 percent after the first five years. That is a difference of 35 percentage points over independent businesses.
This is not to say that every franchise possesses the potential for greater long-term viability than that of an independent business, so it is essential to thoughtfully assess market demand, competition, and other key success factors when considering any business opportunity.
Source: The Alternative Board
The Alternative Board is a franchise system that provides a unique and effective approach to business coaching. The Alternative Board (TAB) Franchise model is built around peer advisory boards, where business owners meet monthly to discuss business challenges and opportunities, share their experiences and offer advice to each other. Alternative Board (TAB) Franchise facilitates these meetings and provides one-on-one coaching to their members, using TAB’s proprietary tools and processes.
With over 30 years of experience, The Alternative Board (TAB) Franchise operates in more than 25 countries around the world. This means that as a franchisee, you’ll have access to a network of business professionals from around the world, who you can collaborate with to grow your business.
Key Highlights of The Alternative Board (TAB)
- 2.5x Revenue growth over the national average
- 25k+ Businesses we’ve helped thrive
- 1,100+ Industries represented in our membership
- $29.3B Gross revenue of companies working with TAB
- 500+ TAB advisory boards across the globe
Competitive Advantage of The Alternative Board (TAB) Franchise
What sets The Alternative Board (TAB) Franchise apart from other business coaching franchises? Consider these advantages:
- Established brand and proven business model: With over 30 years of experience, The Alternative Board (TAB) Franchise has a track record of success and a reputation for excellence.
- Comprehensive training and ongoing support: The Alternative Board (TAB) Franchise provides extensive training and support to help franchisees build their businesses and serve their clients effectively.
- Access to a proven system: The Alternative Board (TAB) Franchise has access to a proprietary business coaching and advisory system that has been refined and tested over decades.
- High demand for services: With the current economic climate, businesses need more guidance and support than ever before, making The Alternative Boards (TAB) Franchise’s services in high demand.
TAB franchise opportunities are currently open and are ideally suited to those with a background in business. TAB is seeking professionals including consultants, coaches, business owners and senior employees who are looking to combine a passion for business with the drive to help others to succeed. Harnessing their existing professional skills and expertise, TAB franchisees can transform local businesses.
Don’t hesitate to reach out to us through email at info@vffranchiseconsulting.com to discover how we can assist you in your franchise journey.
