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Franchise Vs Startup - Which one works for you?

These days, a lot of people want to become an entrepreneur and start their own business or maybe some sort of start up in beginning and then expand it and branch out into more things. Starting or getting into either of these is not that easy, but it does not mean that it is too hard to get into them. It simple depends on a lot of factors, like your knowledge, your interest in the field, your attitude and a lot of other things.

Wednesday June 21, 2017,

5 min Read

When you decide that you want to become an entrepreneur and do something on your own, it is advised that you do your homework and choose something that is better suited for you. You would not want to get into something you don't have a knack for. It might feel and look good at start, but after some period of time, you will be scratching your head. Let us spare us that scratching, because it won't do you any good. So, today we are going to talk about "Start-ups" and "Franchise" and which one is better for you.

As we mentioned in our "5 ways to weave a story around your start-up", a start-up is an entrepreneurial venture which is a fast growing business that provides some sort of service, a product or a process. Start-ups are usually very small scaled initially and are funded by a group of people or as mostly seen, by an individual. Sometimes, an individual starts a start-up and then when the business grows, they expand and get more people involved, which results in increasing number of resources. In the initial phase of a start-up, the expenses may exceed the revenue generated. This is mostly because in this stage, the company is basically growing and testing simultaneously. Start-up companies are always eager to go out and get more exposure. This may also result in more pressure on working and meeting deadlines and might make things a little more stressful. But, in the end, if you do succeed, then the result of your labour is going to be an amazing one.

People and organizations are often a little scared to invest in a start-up. Mostly because of the initial stage problems. Start-ups are often started with some sort of unique idea or products to be made and provided to the general public. If your start-up's idea is truly unique and can be beneficial for everyone, then it is somewhat easy to get attention of the crowd and get funded properly.

Whereas, a Franchise is an already established long term co-operative relationship between two or more parties. A franchise has more chances and rate of success, as compared to that of a standalone business or a start-up. The reason would be that start-ups are mostly testing their strategies and are trying to get into the market. But, on the other hand, a franchise is already into the market. They know the ropes around the business and people with experience are involved in them. When we talk about franchising, we often hear the terms like "master franchise" or "sub-franchise". Franchise mostly deal with and are experienced in developing and working on a large scale industry basis and hence have large scale marketing. As opposed to this, the start-ups lack in funding and don't really have much money to put into marketing. This does not mean that the franchise is better than a start-up. It just has an upper hand.

Operating or working with a franchise could lead to more expenditure and other factors like franchise fee, royalties, wages of large number of people involved etc. could add up. Franchise is bigger and hard to control, whereas, in a start-up this is not the case. Plus, a franchise also has a contract about everything they produce. So, in case a franchise fails (Yes, a franchise can fail as well) it gets really tricky and sometimes even dirty to update and terminate the contracts.

However, in a start-up, you don't have to worry about all these little things. The only thing you need to look at is your basic idea or the product. As mentioned earlier, if you have an exception idea or a product, everyone will automatically come at you for good and you will not need anything else. But, if you don't have anything else to bring to the table, then you will have to work hard and fight your competitors who have same things as you do. They will have the advantage over you though. Because they certainly have more experience than you do and they have been in the game for far longer than you.

So, which one is for you? It is hard to pin point all the qualities you need to run either of them. But, to sum it up and get a gist of all this discussion, if you are planning on being your own boss and have a knack for learning and trying new things and if you are not afraid of failure and don't have a lot to invest, then you should opt for a start-up.

But, if you do have some money with you to invest and are not really interested in going for a highly risky road, you will be better off with buying a franchise, rather than going for a start-up.

This article has been contributed by Himanshu Jain, CEO at LegalRaasta, an online portal for GST Software, GST Return Filing, GST Registration.