Franchise vs. Independent Business: Which is Right for You?

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By Jacob Maslow

For most people deciding to start an entrepreneurial journey, there are two choices: creating an independent business or becoming a franchisee. The three most important factors influencing your decision are the level of risk you want to take and the time and money you want to invest.

Starting an Independent Business

Statistics on independent businesses show up to 80% will make it through the first year, but close to 50% will fail by year five.

When starting an independent business, you take on the risk and excitement. However, the long-term results can prove very rewarding if you overcome the initial obstacles of creating an independent business.

Pros of starting your business include:

  • No franchise fees
  • You have complete control of the business’s branding
  • You can decide what products to offer
  • You can make changes to your business model

Cons of starting an independent business:

  • Developing a good business plan based on market research
  • Creating an efficient management system to run the business
  • Effectively marketing and branding the business
  • Building the business customer base from nothing
  • Structuring the business reputation from scratch

As a first-time business owner, you may lack the experience to sustain a business through the first stages of developing it. Known as the trial-and-error period, this can last between a few months and a couple of years. If this period lasts too long, your business has a greater chance of failing.

Starting a Franchise Business

When you purchase a franchise business, you buy into an existing business known for its products. Besides paying for the business, you also must pay the franchisor a franchise fee and royalty costs. In exchange, the franchise advises you on opening and growing the business.

There are franchise businesses in just about every industry. Some examples of franchise businesses include Subway, MacDonald’s Anytime Fitness, and UPS Stores.

Pros of starting a franchise business:

  • The franchise is a business that is known and trusted by customers, providing immediate brand recognition
  • The chances of brand loyalty already exist from the moment you open your business doors
  • If you buy an existing franchise location, you have an existing customer base
  • You don’t have to worry about the tools or systems to run your business successfully because the franchisor provides these.
  • Franchisor support includes training, financing plans, marketing,

Cons of starting a franchise business

  • With a franchise business, you cannot run it as you want or offer products not included in the franchise
  • You pay royalties and fees to your franchisor in exchange for their ongoing support, the continued use of the franchise name, its reputation, support, marketing, etc.

A franchise isn’t suitable if you prefer to do everything alone.

Is a Franchise or an Independent Business Right for You?

Here are some of the most significant aspects to consider when deciding between franchising vs. independent business:

Innovative Business Ideas

Most people want to start a business to become their own boss. If you are one of these people but have an innovative idea, then franchising will not allow you to present your ideas or to deviate from their rules and regulations. Therefore, start an independent business if you want to achieve your dream.

Business Autonomy

If you want to open a business to get away from the structure of the corporate world, then a franchise may not present the autonomy you seek. With a franchise, most elements are controlled, including employee training, marketing, and operating hours.

Therefore, an independent business gives you the desired autonomy if you want control over these elements.

Business Support

One of the major advantages of a franchise business for an inexperienced business owner remains ongoing support. Franchises provide a full range of services, including mentorship to solid business plans. In addition, their tried and tested formulas will guide you in all areas of your business, including goals the company must achieve and a ready marketing strategy.

Becoming a franchisee takes the responsibility of developing and maintaining a business off your shoulders.

Success Rates

The statistics for independent businesses show they appear to have higher failure rates than franchises. Some of the reasons for this include the lack of support franchisors provided. However, franchisees also follow a blueprint that’s already proven, increasing their chances of succeeding.

Many factors can contribute to long-term business success, whether you decide on a franchise or independent business. Some factors include the industry, product offerings, and general business climate. Research and a good business plan are required either way.

Business Development Requirements

When starting an independent business, you must consider several essential elements. These include continued inventory, research, branding, marketing, expenses, corporate structure, projected profits, and a business plan with short- and long-term goals.

With a franchise, you get a turn-key solution and use the head office’s decisions. It’s a solution that works best if you don’t want the responsibility of making all the above decisions.

Financing Your Business

Depending on the type of business, the startup costs of an independent company can start from as low as $10,000. Unfortunately, when buying a franchise, the prices are usually considerably higher.

Most franchises require you to look for prime real estate locations to ensure visibility for their brand. Your franchisor may also expect you to meet unexpected expense payments, and they may also require frequent in-store revamps.

When deciding which type of business suits you best, compare the financial requirements of individual businesses and franchises before making an informed decision.

Financing Your Business

Finding sufficient capital to start a business and maintain its cash flow remains one of the biggest challenges for prospective business owners. Before deciding between an independent business or franchise, you must know what financing you can get and how much of your savings you are willing to risk.

Financing, whether from your bank or through a franchisor, entails monthly repayments that place a burden on a young business. Therefore, you must carefully consider your options and repayments before deciding which business model is best for you.

Final Take

Both franchisees and independent business owners are entrepreneurs who want their businesses to succeed. Whether you prefer one to the other will depend on whether you like to go it alone or choose to have the safety net of a franchisor. Besides the risk level, you must consider the time and money you are willing to invest in your chosen business path.


What are the advantages of setting up a franchise business?

The main benefits of owning a franchise business include ongoing support from the franchisor, established brand recognition and market share in most instances, access to marketing strategies already proven to work, and increased chances of success due to tried-and-tested formulas.

What are some of the requirements for starting an independent business?

When launching an independent business, you must consider several essential elements, including inventory management and replenishment, research into industry trends, branding, and marketing development, expense tracking and budgeting tools, corporate structure setups such as LLC or sole proprietorship status selection, projected profits based on realistic goals set during planning stages, and preparing a comprehensive business plan with short- and long-term goals.

What are the different financing options for businesses?

Business owners can access various financing options, including traditional bank loans and credit lines, venture capital funding or angel investor money, Small Business Administration (SBA) loan programs such as the 7(a) Loan Program or Microloan program, crowdfunding platforms such as Kickstarter or GoFundMe, using retirement funds through a Self-Directed IRA, government grants available from local governments and nonprofit organizations, taking out personal loans from friends and family, equipment leasing arrangements to purchase needed tools without having to swipe a credit card or apply for a loan.

Which type of business is best suited for me?

When deciding which type of business best suits your needs, consider the time and money you are willing to invest in a particular business path. Assess the financial requirements of both individual companies and franchises before making an informed decision. Additionally, evaluate your risk level and decide whether you prefer to go alone or seek the support a franchisor offers.

Finally, do detailed research into each option to make an informed choice when starting your business journey.

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