Business II, Week 2 – Franchise vs. Independent

Write a 250-word essay comparing the franchise model against going independent and “doing your own thing.”

    When starting a business, there are many different methods of ownership. In this essay I am going to be comparing two options. Joining a franchise versus going solo and starting a business on your own. Each has their risks and rewards.

    Say you decide to start your own burger restaurant. You do not need to invent the burger, of course. You could have your own recipe if you want. You can choose the theme of the restaurant; what outfits the employees wear, what image to have for your logo, and put on all the napkins, the color scheme of the building and clothes. You will have to decide who to buy your ingredients from, and who to buy your utensils from. You may build your own building, and you will have to choose the dimensions of the building, the materials with which to build it, the interior and exterior design. Perhaps you choose to buy or rent an existing building. You may need to do renovations. You will have to decide which walls to knock down, which to leave standing. Which color do you want to paint the walls, which material for the floors. All the choices are yours. This can be a good thing and a bad thing. It is tough to make big decisions, such as constructing or renovating a building. You need to decide how to advertise and test different ads to see which works. Your restaurant is at higher risk of closing down because of lack of business.

If you join a franchise, there are way less choices for you to make. Say you join McDonald’s and open up a McDonald’s restaurant. Once you have completed all the legal steps, the McDonald’s franchisor tells you who to buy the napkins and utensils from, who to get the ingredients from, the recipes for all the items on the menu. He tells you what to put on the menu and what outfit for the employees to wear. He tells you where to buy those outfits and what color scheme to make the restaurant. You do not have to make any huge choices, because your restaurant is part of a whole chain of restaurants that have a certain theme, certain menu options, certain materials to build with. All you have to do is follow their guidelines and recipes.

When you are a part of a franchise, you do not make many decisions for yourself, if any. This takes some risk out of it because the franchisor’s way of running things has been shown to work. If it did not work, he would not have so many restaurants open. Independent restaurants have a lot more to worry about. You might like that you make all the decisions when you own your own restaurant, but is it really worth the risk?

19/20 restaurants fail. When you start your own new restaurant, you have to call all the shots. No one tells you how to run your restaurant, and who to buy from and what to paint the walls. But you also have to do hard work to find out which ad campaigns and color schemes work to attract customers. The risk factor is high when you are an independent restaurant. You take all the loss if your restaurant faces hardships or closes down. If you are part of a franchise, the risk goes down. The franchisor tells you how to run the restaurant, how to advertise, how to attract the customers. He will take most of the loss if your restaurant closes down. However, reward also goes down when you join a franchise. Profits are split between you and the franchisor, whereas 100% of profits would go to you if you owned your own restaurant.

In conclusion, starting an independent business is much riskier than joining an existing franchise, especially one that is doing well. Although independent businesses are riskier, they are also more rewarding, as you get 100% of profits. With a franchise, you are protected from risk, but the profits are split between you and the franchisor, lessening the reward. In an independent business, you make all the decisions yourself, which can be tough sometimes. In a franchise, the franchisor tells you how to run the business, so you do not have to worry about what works and what does not. Both are good options, depending on your situation, your resources, and your business skills.

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