What Is the Difference Between a Small Business and a Franchise?

When deciding between starting a small business or buying a franchise, the main difference to consider is control. Small business owners decide when and how their business functions, whereas franchise owners will have to abide by guidelines put in place by the franchise parent company, 

An entrepreneur who hopes to have complete creative control over their business might find franchising to be a bit confining. But within those confines lies a reliable business model that can be used to guide franchise owners to success. In fact, a recent survey showed that franchises have an 8% higher two-year success rate than independent businesses. 

Here are some of the more intricate differences between owning a small business and owning a franchise. 

Ability to Make Decisions

When market conditions fluctuate, franchise owners can’t change their products and services like a small business owner can. The franchisor makes those decisions, and all franchisees must follow suit. But this also gives franchise owners the security of knowing the products and methods they’re using have been tested for success in other territories. 

Available Resources

Along with the stability franchisees get from tried and true franchise methods, they’re also privy to a plethora of resources from their parent company. Whereas small business owners don’t have exact business models to follow, franchise owners will find a team that knows what it’s doing, along with corporate support and bulk purchasing power. 

Brand Recognition

It takes a while to get traction from a new brand. Small business owners don’t have the luxury of an established brand with a built-in customer base. This is typically an advantage of owning a franchise, except in the case of negative publicity, when all franchise locations would be affected. 

Startup and Operational Costs

Franchisees can skip the startup phase and will have a lower up-front investment than a small business owner. However, a franchise launch’s timing and grand opening processes are usually dictated by the franchisor, so franchisees don’t have as much control over when and how they open. Franchise owners will also pay regular royalty fees to the franchisor.

The Bottom Line

All this recognizability, support and reliability leads to proven success for franchises. The U.S. Small Business Administration offers plenty of resources for anyone hoping to buy a franchise. Potential owners can calculate costs and figure out how much they’d need to invest to get started in the world of franchising. 

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