5 Reasons Why Start-ups Are Riskier Than Franchise Businesses

Both, launching a start-up and starting a franchise business, have their own rewards. While the success of the business is determined by the passion and objective of the entrepreneur, there is no doubt that start-ups are riskier than franchise opportunities. Here are a few reasons why: 

  1. Brand Building

Most start-ups fail because their founders lack both, the time and resources, to build a brand from scratch. However, in the case of a franchise business, even an emerging brand is already well-established and has considerable brand recognition and recall value. The brand name is already set, and the owner does not have to invest in the same. 

  1. Funding

If you know or have worked, in a start-up before, you will perhaps understand how difficult it is to get funding. The founders have to work really hard to get someone to invest in their company. Moreover, the other aspect of this problem is that not all start-up owners know how much money they will need to launch their business and how much they will need to survive in the future years when their business picks up. But, that’s not the case with a franchise business, because entrepreneurs often get assistance with financing options from the company, and are informed well in advance about the amount of money they shall need.

  1. Learning and Mistakes

This is something that holds utterly true in case of a start-up. You might find a lot of people willing to advise you on how to run your business, but any mistake you make – big or small – can be a huge setback. Especially, if you are starting a business of your own and do not have prior experience, you are bound to take a few missteps. But, in case of a franchise business, the franchisor has already made those mistakes and learnt from them. Thus, they are able to guide their franchise owners much better. 

  1. Business Model

To establish a successful business, start-up owners need to research, design and test their business model. More often than not, many start-ups fail despite having a brilliant idea because the owners do not have substantial business operational knowledge. In the case of a franchise business, everything is pre-planned and there is a system in place for franchise owners to follow. This means that a proven business model is already in place and the risk is, thus, considerably lower. 

  1. Support

Founders at start-ups know that they are mostly on their own and the only help they can initially get is from family and friends. However, to make a business thrive, one needs both internal and external support and many start-ups fail to find relevant support, training and resources. But franchisors usually offer a support team, providing ample training, help in set-up and launch and also provide marketing support.

Starting a new business is fraught with risks, but surely, opting for a franchise business is considerably safer than that of establishing a start-up. Thus, if you are an aspiring entrepreneur with no prior business experience, a franchise business is probably a better option for you.  

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