FRANCHISE VS OWN BUSINESS: WEIGHING THE PROS AND CONS

Starting and owning a business may well be your dream but remember: behind many a successful entrepreneur is at least one failed business. Often more than one. In an economy where unemployment is high, the logical thing to do is to create your own job. However, that’s easier said than done and comes with significant risks. In this article, we’ll unpack the significant advantages of buying into a franchise when compared with going into business alone.

Pros of starting your own business

Probably the most obvious advantage of running your own business is that you are your own boss. You control what you do, where and when you do it, whether it’s from your bed, basement or garage dressed in your PJs or to the nines. This means you can manage your overheads and other costs with the added advantage of no profit share or third-party fees.

Cons of starting your own business

Going it alone can be – as the word suggests – lonely. Unless you make a concerted effort to find a mentor and build a support system, you are literally on your own with everything. From budgeting and brand design to “doing” the business, which usually involves long, hard days – and weekends.

Then there’s the risk: can you be certain that your new brand and product range or real estate company will take off? Will you see a return on the money you’re sinking into your new venture? These are the questions that’ll keep you awake at night as you work towards establishing a market presence and a strong client base.

Last, but by no means least, it usually takes anything between three and five years to see any real return on a new business with only about half of new businesses making it to five years or beyond. Would you really want to face this alone, or would you prefer to have the backing and support of a proven business model that is known to be profitable in time?

The downside of franchise ownership: fees

When you buy a franchise, this will probably cost more than starting your own business from scratch because there will be both the capital cost of the franchise itself, as well as what you will have to spend on setting up and running an office, etc. However, when it comes to RE/MAX, ours are the most competitive franchise sales fees in the market.

Five key advantages of buying a franchise

There are a number of advantages of buying into a franchise:

1. Immediate brand recognition which brings both market penetration and customer trust.
2. Raising capital (getting a loan) is easier: banks see established brands as less of a risk than a new, unknown start-up.
3. Related to the first two is the fact that there is less risk with a franchise than a stand-alone start-up.
4. Support and training are integral to the franchise model: in addition to support for setting up your business, the franchisor provides training. Also included are established – tried and tested – tools and systems for you to hook into and seamlessly run your business.
5. Last but not least, as a franchisee, you are part of a network which in turn provides opportunities for growth and support.

The unique RE/MAX approach to franchises

Although RE/MAX is an international brand that is based on franchises, we are unique: all our branches are independently owned and operated with no interference from the ‘Head Office’. However, at the same time, RE/MAX agents and property brokers have access to a host of bespoke technology and tools ranging from a design hub and resource centre to an advanced billing system, CRM, and listing management system.

Most people who work for themselves – either as franchise owners or of businesses they’ve started – will tell you that they are their own best and worst bosses. Best, because they are in charge and (almost) nobody can boss them around. Worst, because nobody makes them work harder and put in longer hours than they do, themselves.

Most will also tell you they wouldn’t change it for the world.

If you’re interested in starting or buying your own RE/MAX franchise, please get in touch with us by completing the form that is available on our website.

Have more unanswered questions? Here are some related questions – and answers – that might help…

How is a franchise an “almost” independent business?

When you buy a franchise you buy an existing business that is part of a bigger organisation that is governed by its own rules and requirements. This means that although you own the asset and can sell it, you will have to follow certain rules and pay fees which might cover things like marketing, branding and support. Each franchise model is different though and will offer different levels of flexibility and support.

What is the failure rate of a franchise?

In South Africa, the failure rate for franchises is around 10% making this an excellent business model for budding entrepreneurs to consider.

What happens if you buy a franchise and it fails?

If your franchise fails, what happens depends on what is in your franchise agreement. When you buy a franchise – rather like an antenuptial contract when you get married – make sure you understand that part of the agreement. Also, remember that franchise agreements are covered by the South African Competition Act.