Independent Ownership or Buying a Franchise — What Is Better?

When you open up your business, will you be an independent owner or a franchise company? Buying a franchise restaurant is a great idea for some, but independent options provide their benefits.

Franchising Advantages and Disadvantages

Owning a restaurant franchise is a great way to start a business because you already have brand name and equity, so you’ll be able to leverage these to your advantage.

One of the key benefits of franchising is that people will trust you.

Even with minimal advertising owning a franchise restaurant means that:

• People already knew the name
• People tried other locations before

You can start a restaurant franchise or buy it to get started. An established location has the benefit of knowing how the location will perform. When buying the business, you can:

• View the sales records
• View business trends
• Reduce your risk of failing

Pros and Cons of Franchising

As a franchisee, you’ll have the following franchising advantages:

• Branding and reputation
• Reviews from previous locations
• Training and systems in place
• Large marketing radius and budget
• Menu determined and in place
• Sources for ingredients

The advantages of a franchise are that everything is in place and ready for you to succeed. If you have the skills needed to run a business, you can make a lot of money faster.

But there are also disadvantages:

• Brand reputation can be limiting and even impact the business if a scandal occurs
• You have to pay fees and royalties
• You lose a lot of the control you have as an independent restaurant owner
• Subject to scrutiny from the franchise

For a lot of owners, the brand reputation is the most concerning disadvantage. Let’s assume that a location was plagued with salmonella poisoning, leading to every local and possibly national news station picking up the story. Even if your location wasn’t part of the outbreak, you’ll have your reputation impacted.

What is a franchise restaurant?

It’s a business that has a name, reputation, brand equity, advertising, and marketing in place. You’ll also have your personal training outlet that can help you promote your business during economic downturns and how to best achieve growth.

While it’s easy to learn how to start a restaurant franchise business thanks to training, you may like the challenge of owning an independent restaurant.

Independent Restaurant Advantages and Disadvantages

There’s a big difference between a chain or franchise and an independent restaurant. An independent restaurant definition would be your own business. But you should also know that owning a restaurant has its pros and cons.

The advantages are:

• Most restaurant owners that start as an independent have experience in the industry
• You’re not limited by brand identity and can take full control of your brand
• You have full control over your marketing, menu and operating hours
• You can freely add or remove menu items as you see fit

The disadvantages are:

• You’re on your own with no training or resources to rely on
• You don’t start with brand recognition or a plan
• You start without resources and connections to suppliers or insurers

Opening a Franchise vs Independent Restaurant

There are benefits to each restaurant type, and you’ll find that opening your independent location requires:

• More upfront capital to create a brand, menu, and market the business
• Creating connections in the industry
• Learning the requirements of permits, licensing, insurance and other fees

If you don’t have a lot of capital or are not able to donate enough resources to your marketing campaign, a franchise may be a better option.

When you open a franchise, the franchisor will take on a lot of risks. But you will also have to have:

• High levels of liquidity
• Pay an initial fee
• Secure a location upfront
• Pay national advertising campaign fees
• Pay royalties on all sales made

Independent owners are usually veterans in the industry and may even seek loans and traditional forms of raising capital. As an independent, you’re using your skills and experience in the field to make a run at operating your own restaurant. If you have not enough experience in the industry and you’re flush with cash, it’s better to open a franchise.

As a franchisee, you supply the initial fees and can an already proven business model. You will have all the protocols in place that can set you up for success. A lot of franchisees are successful business owners, so they may know how to manage a business and delegate tasks in a way that makes the most sense.

You’ll have to sit down and decide which type of restaurant you want to open. Both have their perks, but ultimate freedom comes from owning a business that you control from start to finish. Risks, on the other hand, are greater controlled by owning a franchise.

Source: https://mcdonaldpaper.com/blog/pros-and-cons-of-franchise-vs-independent-restaurant