That is not a simple question to answer, as it depends on the individual. Owning a business is a dream many share and a life changing experience for many families. You want something you enjoy and is profitable with a fair asking price. There are differences and similarities in independent businesses and franchises.
Individuals who leave corporate jobs after many years of working there tend to fit comfortably into franchises. They like the order and knowing things will be done a certain way. They have followed rules for many years and like having everything laid out for them. This also applies to individuals who work best in very structured businesses. Some individuals want to own their own business so they can do what they want to do and how they want to do it. They don’t want anyone telling them how to run their business. Neither is the wrong decision. You know where you would be the most comfortable, and that is where you should be.
There are lots of types of franchises. Many people think of franchises as fast food, but that is only one type. If you know what type of business you want to own, you can compare the cash flow statements from a franchised business and an independent business. Another option is starting a business franchise by purchasing a franchise from a franchisor. You would have a greater risk of failing than if purchasing an ongoing franchise business or independent business, because they are established. However, if you are considering starting a business from scratch or starting a franchise business, the franchise business would be the safest and easiest to start. The franchisor would do the research for the location and determine the demand and demographics in the area chosen. The franchisor would also provide training, be available for questions, and stay in close touch, requiring regular reports. If purchasing an ongoing franchise or an ongoing independent business, the financial records should be the same for your review, as the royalties and any other expenses will be deducted from the income. You will be looking at the adjusted cash flow for both. You may find the royalties paid were not really a factor, as being associated with the franchisor brings in more than enough revenue to offset the royalties.
When buying a franchise, you will own a business with resources of a proven franchise. Included in the asking price will be the franchise fee, which will be listed as an asset of the business. You will be buying a protected territory, which means the franchisor will not allow another franchisee to sell in your area. You must follow the franchisor’s policies, which may include uniforms, packaging and marketing materials. You also have brand recognition and help developing your customer base. An independent business will likely have these in place, also. The difference is the franchised business must continue with certain things and not make changes without franchisor approval. You will also be required to redecorate periodically. This is not a bad thing, as your business stays fresh and up to date. Another advantage is that you are part of a large group and not just your single business, so you take advantage of purchasing your supplies cheaper because of bulk buying by the franchisor. Remember, whether you are buying a franchised or an independent business, each will have financials and adjusted cash flows with all income, expenses, and adjustments to help determine the value of the business.
You can find listings for independent and franchised businesses on the internet, and you can find start-up franchises on this website, BusinessBroker.net.
