Joining a Franchise vs. Creating a Startup - Understanding the Difference

Joining a Franchise vs. Creating a Startup - Understanding the Difference

March 1, 2021 By Brooke Davis
Categories: Blog

To join a franchise or to create a startup? That is the question. And the answer depends on several factors that dictate your ability to succeed in your new endeavor. For those looking to start a business, but are unsure of which route to take, this post will highlight the differences between the two. This is to ensure that you can make an informed decision before jumping into the business arena. To start:

What is a Startup?

A startup refers to a company founded by one or more entrepreneurs who develop unique products or services to help find solutions, fill a void, or add efficiency in a marketplace.

In the beginning stages of a startup, little to no revenue is being generated by the business. The funds that startups are using come from bank loans or investors. For developing, testing, as well as marketing the good or service.

Startup Takeaways

  • Startups are an entrepreneurial endeavor. Where individuals who believe they can provide value and search for capital to help get the business off the ground.
  • The first hurdle for startups is to prove the legitimacy of their concept to potential investors and financial backers.
  • They are a risky venture for investors because the value of the good or service has not been tried and tested in the marketplace.

What is a Franchise?

A franchise refers to a type of license that allows franchisees to use a franchisor's proprietary trademarks, operational processes, and business knowledge to sell a product or service under their business name. To start a franchise, franchisees must pay an initial startup fee and other royalties.

A franchise is considered a joint venture between the franchisor and franchisee. And is a popular alternative to startups for entrepreneurs due to the already established infrastructure that the franchise automatically inherits. 

Franchise Takeaways

  • Franchisees inherit the business identity along with operational processes from the franchisor.
  • You must have the initial investment before acquiring the franchise license.
  • You must pay royalties to the franchisor.

While startups are a viable route for entrepreneurs to take, it is more of a risk. According to information collected by Forbes, around 90% of startups fail compared to the 5% failure rate for franchises. The reason being is:

  • They do not understand the market – A major reason why startups fail is that the market for the product or service the business provides is too small or nonexistent. Which leads to low demand.
  • Poor management – Poor management is a leading cause of startup failure. Because most startups operate with little revenue, most of their fund is usually going to r&d, as opposed to finding the highest caliber employees.

Franchises like Senior Helper eradicate a lot of the risk. With regards to starting a business and providing essential senior care for those in need. With services ranging from companion and live-in care to Alzheimer's programs as well as dementia care, you can rest assured that Senior Helpers will equip you with the infrastructure needed to service the growing list of consumer needs in the marketplace. To learn more about the Senior Helpers franchise call us at 1-877-376-7120 or visit us for more information today.