Startups vs. Franchises: Which Is Right for Your First Business?


So, you’ve decided you’re done working for other people, and that you’re ready to dive into starting your own business. Great! There’s nothing quite as rewarding as owning your own business, and nothing as exciting as taking that first step.

But then comes the question of what that business will be. You probably already have an idea of what product or service you want to offer. But do you want to jump right into it with a startup, or would you prefer to ease into the world of being an owner by purchasing a franchise? That question can be answered by deciding if you want to own a startup or a franchise.

Both options have their pros and cons, and it can be a tough decision to make on your own. But that’s why we’ve put together a handy guide to help you decide which route you should take.

Franchise vs Startup – What’s The Difference?

First things first, let’s discuss the difference between a startup and a franchise. Both are businesses that are owned by an individual, and both are excellent ways to break into the business world. But that’s where the similarities end.

With a startup, you’re building a business from the ground up. That means it’s entirely yours–your brand, your idea, and your intellectual property. Most of the companies you see today–even big brands like Microsoft and Amazon–started as a startup.

A franchise, on the other hand, is buying a part of an established business. Typically, these are restaurant chains or secondary locations for businesses. With this, you essentially buy the right to use an established brand with a proven track record, but you otherwise act as the owner of that specific branch. 

Both options have their benefits and drawbacks. Let’s take a look at each, and you can decide which one works best for your business venture.

Making a Startup

When you make a startup, you have the flexibility to do whatever you’d like with your business. The branding, culture, and business model are all up to you. You’re truly self-employed in that regard, with no one you need to answer to. This can work really well if you’re a big picture, entrepreneurial sort of person. 

Plus, the startup costs can be fairly low–you don’t necessarily need a storefront right away, especially with the internet acting as the world’s market. You can even get started while still working at your current job to build your business without risking income loss.

That said, startup businesses don’t come without drawbacks. A majority of your investment will go into simply making your brand known–whether investment is with money that goes toward a professional advertising agency or team, or investing your time in marketing your business yourself through social media and networking. 

And, of course, being your own boss means being responsible for everything. More reward, but also much, much more work at the start–and more on the line if it doesn’t take off.

Final verdict:


  • Work with your own idea
  • Create your brand from the ground up
  • Fully own your business
  • Low starting costs


  • Need to establish your brand
  • Investing in advertising
  • Bigger risk of loss
  • Little to no support as owner

Buying A Franchise

Alternatively, if you want to start a business but don’t have a clear cut idea of what service you want to provide–or you want to avoid the hassle in building up your brand–buying a franchise is a great way to break into the world of being an owner. 

Rather than starting a business from scratch, you’ll be able to use an established business’s reputation and business model while enjoying the perks of owning the business–you might even be able to quit your primary job once you get started!

You also can look forward to not having to network or work to get investors behind your business, nor having to struggle to make your business seen. When you buy a franchise, you can skip ahead of the growing pains of an independent business while having the support of an established business behind you when you need it.

Of course, like with a startup, there are downsides to consider. While you’ll get to own your particular part of the business, the overall company belongs to someone else. That means you’ll have to pay ongoing royalties to the actual franchise owners in order to keep using their established brand. 

Plus, when you open a franchise, you’ll have the added pressure of pleasing an established customer base–and very little room for you to put your own spin on things. You’ll also want to bear in mind that, while you’re skipping many of the difficulties of starting a completely new business, the starting costs of a franchise are typically much higher than a startup because of that. 

Final verdict:


  • Brand recognition
  • Established business model
  • Less risk
  • Support from the main company


  • Higher startup costs
  • Royalty fees 
  • Less flexibility
  • Pressure from customer base

Which One Do You Choose?

Ultimately, there’s plenty of good and bad with both startups and franchises. Before you choose one or the other, ask yourself a few questions:

  1. Am I a big picture person who’s willing to wait for results?
  2. Do I have a unique business idea I want to share?
  3. Would I enjoy being part of something bigger than my single business?
  4. Why do I want to own my own business?

By answering these questions, you’ll be able to tell which option works best for your personal needs, and you can start making business plans from there.

If you are interested in buying a franchise–or franchising your business once it’s off the ground–Knock Out Franchising has your back. We make sure our clients have everything they need to make their franchise a TKO – total knock out!