While the two may often be confused, there is a difference between entrepreneurship and franchising. In fact, the more you know about them, the more important those differences will become.
Entrepreneurs are individuals who create new businesses, as defined by Investopedia. They’re the ones who come up with new ideas, take risks, and benefit from most (if not all) of the rewards.
Conversely, franchises create products or services within a brand (trademark, name, business model). Typically, investors or individuals can pay to join in on the franchise, using the name and system as their own.
The Key Differences
There are a few key differences between entrepreneurs and franchises. For one, franchises are already an established business. They’ve already proven their value, and thus the risk for them is reduced. Meanwhile, an entrepreneur must develop the idea and business plan from the ground up, with no promise of success.
There’s less risk going into a franchise since they’ve already proven the success. It also requires less money upfront, and the franchise itself will even make it clear how much money is required to buy-in. If only an entrepreneur knew how much a business idea would cost them in the long run!
Franchises tend to be more stable, and less likely to fail. The brand and policies have already been established, so there’s less work required, and less risk involved. As opposed to the work of an entrepreneur, which won’t have that foundation to work with.
Finally, franchises tend to require less business experience. After all, everything has already been established, including the rules on how they must all run. It takes less know-how to follow those guidelines.
Putting It In Simpler Terms
To put it simply, entrepreneurs form a business from their own minds, creating and establishing every little detail. They take all of the risks and get more of the payout because of it. While franchises follow nicely written-up plans and rules, taking little risk and investing less in the long run. But likewise, they might not get as much back.
Which One Is The Right Path For You?
If you’re trying to decide which path to follow, the entrepreneurship path, or the franchise path, it’s important to ask yourself a few questions. As Franchise Direct phrase it: “are you comfortable stretching the rules? Are you prepared to make powerful enemies?” If the answer is yes to either of those questions, then the path of entrepreneurship might just be the right one for you.
Being an entrepreneur is all about taking risks, forming ideas, and running with them. While you will create contacts and allies along the way, it’s just as likely that you will step on some toes in the process. If this doesn’t sound appealing to you, and instead you’d rather jump in and follow some predefined rules, then you know that the path of franchising is better suited for you.