The debate rages on!!  Are franchisees entrepreneurs?  How can they be entrepreneurs when they aren’t doing it all by themselves?  How can anyone think that entrepreneurship and franchising can be grouped together?  Silly thinking, eh?

After all, the cost of getting into business is very different.

A franchisee has buying power that an independent person doesn’t have.  The cost of a sink can be hundreds of dollars more for the guy on his own.  Franchises have the ability to tell a manufacturer or wholesaler that they can buy a number of them each year.  An independent owner buys one at a time and is lucky to get a deal.  OK, that doesn’t sound good for the guy on his own, but he has freedoms the franchisee doesn’t have.

An independent owner can try out new things at any time.

That means they can do as they please.  Sometimes that means winning big!  What about franchisees?  They have to follow a system and can’t be trendy and jump on things.  Of course, trends fail every day and the cost of trying something out can sink a business if it is rejected by customers.  The research and development costs are spread out in a franchise where they can roll things out slowly and work the kinks out before getting the whole brand to try something new.  The independent owner has one shot to get it right. Dang! I was so close to making it sound like it was better to be on your own.

How about pricing?

The guy on his own can set pricing anyway he wants.  He can undercut the competition or increase prices when he likes.  Franchisees many times have the ability to set their own prices.  If they are part of a national marketing plan, they can’t though.  Think about McDonald’s and Subway.  They have to follow the prices advertised or they get beat up by the customers.  Although I must say, the advertising buys behind the set prices will bring in more customers,  so that might be a plus for the franchisee too.  Speed at which an sole owner can change anything is much faster than a franchise.  I have to give one to the independent guy even though the marketing edge goes to the franchisee.  Split the point!

Everyone needs a mentor.

Mentoring is one of those items that is a cost because you have to have someone to talk things over with and to find the right person can make all the difference. In a franchise, everyone is thinking about how to make more money in the stores.  The cost is part of the royalties you pay to be part of the organization.  You can think of it as a membership fee.  For the guy on his own, finding a mentor to help can be costly and you are never really sure that person is working in your own best interest.  Also, there is usually only one or two people you can afford to pay for help.  There are services at non-profit groups like [1] SCORE and even the SBA has help for you, but the majority of people with the right skills to help you grow are expensive.  (On a side note, I like SCORE an American small business mentoring service.  I am not affiliated with them, but they do a great job!)

Building a business from the ground up is a challenge.

Building out a space to use every square foot for turning a profit can drive anyone crazy.  Just finding the right space is a challenge.  Negotiating with landlords on retail space is requires special skills.  A good franchise has those people on staff.  Trying to get a good deal on your own is like trying to order dinner in a language you just learned.  Franchises rule on this one (the good ones at least).  There is also the blueprints for the contractor, finding the right contractor, and making sure the build-out actually matches the blueprints.  If you think you can do this, you either have a real estate license or you have a contractors license.  Don’t try this on your own.

OK, so the battle isn’t much of a battle.  Unless you have a concept that you don’t need much to get off the ground and retail space isn’t needed, you are better off working with a franchise.  Smart moves should be a bigger part of being an entrepreneur.  Franchisees are entrepreneurial.  If you put money, time, effort and sweat and tears in to start a business you are an entrepreneur.  The costs of working for yourself are big.  A franchise just limits the risk better.

Bob Griffin - CEO
BGriffin@BusinessBulldog.com

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