Should I Purchase a Franchise or an Independent Business?

Buying an established company can be a lucrative way to get into the world of business. With an already up-and-running company, you don’t need to worry about start-up costs and can just get straight into the day-to-day. But is it better to buy into a franchise or to shop for an independent business?

Considering buying a business but don’t know which way to go? We’ve gathered all the information we can about buying a franchise and buying an independent company to help you understand what each would entail. We have gone over the pros and cons to help make your decision a little easier. Take a look now to find out more.

What is a Franchise?

So, what is a franchise and how does it differ from an independent business?

A franchise is essentially a license that you buy from a franchisor that allows you to use their logo, trademarks, etc., and run a business under their name. Many of your favourite  fast food chains and eateries, including Pizza Hut and Donut King, are actually franchises, where the owners are franchisees of the bigger business. When you become a franchisee, you get access to confidential company data to help you run a successful business under the bigger company name.

The buying and selling of franchises is a big industry in Australia, and on Eden Exchange, we have a steady stream of franchise listings for you to browse daily.

What is an Independent Business?

In total opposition to a franchise, an independent business is exactly as it sounds––run totally independently. The owners use their own logos, branding, and company name to trade, produce, and sell and all company details are kept within that one business.

An independent business may only be one shop, premises, or person, but it can also have multiple chains around the country.

Eden Exchange is a platform that offers active buyers a chance to get their hands on many of the independent businesses currently for sale across Australia.

The Pros and Cons of Purchasing a Franchise

Now you know more about what a franchise is, you may be wondering if there are any benefits to buying one for yourself. We have examined the pros and cons of this decision below to help make your choice a little simpler. Check it out.

Pros

• Instant brand recognition - One of the main selling points of owning a franchise is that you don’t need to work to get your name out there. Often, franchisors are multi-national companies that are household names for many. This means that you’re already established with a loyal customer base before you even open the doors.
• No start-up process - Again, as your business is already established, you don’t need to get through the startup phase where you plan out a business model.
• Privy to company data - When you become a franchisee, you will get access to company data, information, and training. You won’t have to do research for yourself and instead are given all the material you need to succeed.
• Marketing support - If the idea of marketing your brand sends you into a panic, then a franchise could be for you. Franchisees often get lots of support for marketing campaigns from the franchisor.

Cons

• Higher costs in early stages - Buying into a franchise is not cheap. In fact, it’s one of the most expensive ways to get into the world of business.
• Ongoing royalties - Unfortunately, the costs don’t ever really cease when you own a franchise. Once you’re all set up, you have to continue to pay royalties for the use of the franchisor's name and reputation.
• You have to follow someone else’s rules - If you’re getting into business so you can be your own boss, then becoming a franchisee may not be right for you. The franchisor has the final say on lots of aspects of your business, meaning you’re not totally in charge of what you do and how you run things.

The Pros and Cons of Purchasing an Independent Business

If franchising doesn’t sound like your cup of tea, you can still consider buying into an independent business. Take a look below to find out more about the advantages and disadvantages of doing so.

Pros

• The groundwork has been laid - As is the case with buying a franchise, some of the groundwork is already laid for you to be successful in business. You don’t need to come up with business plans for a new business, and you may already be established enough to keep a loyal customer base.
• You are your own boss - Unlike with a franchise, you’re beholden to no one but yourself when you run an independent business. This means you get to make all of the decisions about where your business is going.
• Experienced employees - When you take on an already established business, you’re also likely to take on experienced employees who know the business well and can support you as you take over ownership.
• Problem solving may have already happened - If you’re very lucky and you take on a well-established and seasoned business, then you may find that all of the teething problems of a new business have been ironed out. This will leave you with a smooth running operation and less reason to worry!

Cons

• Considerable start-up fees - While you don’t need to invest quite as much as you would if you were buying into a franchise, you will still need to employ professionals, like lawyers and accountants, to make sure the business checks out, all before you have even bought the business. Buying a business is by no means a cheap way to make money!
• Outstanding contracts - While you may be left with some great employees, you may also be left with some who aren’t so great. Unfortunately, buying a business may leave you with contracts that aren’t the best that you still have to see through.
• Being a new boss - Some employees may not take well to having a new boss, and some customers may also take the same approach. You may have to work hard to establish yourself as trustworthy and up to the job to gain some loyalty back.

Which is the Best Choice For Me?

As with any business decision, the best choice is often incredibly personal. Though there are some things to consider. If you’re new to the business world and want a little more guidance and support, then a franchise may be the best option for you. Franchisors offer lots of support, training, and feedback, meaning you can grow and learn under this kind of scheme. 

On the other hand, an independent business means you truly are your own boss. If the idea of being beholden to a franchisor doesn’t seem to fit, then you may be best with purchasing an independent business instead. But, remember, buying an independent business means doing all of your own training, marketing, and planning. You need to be ready to take all of that on before you buy!

Final Thoughts

Buying a franchise or an independent business can be a massive undertaking. Both require lots of capital and even more work. There are pros and cons to both and you can certainly make money with both. Weigh up the benefits and drawbacks of each to work out which is the best decision for you and your personal business goals.

If you’re looking to buy a franchise or an independent business, then you have come to the right place. Eden Exchange is an established platform for buyers and sellers of businesses. We offer a simple way to buy and sell and have a community of active buyers ready to get their hands on the next up-and-coming business in their area. Our listings are extensive, covering many industries, so you’re sure to find something that suits you. Get in touch today for more information on our innovative platform.