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If you’re looking to start a small business, you typically have two options: You can start an independent business of your own, or you can open a franchise. A franchise is a business model in which a franchisor, usually an established business and brand, allows a franchisee to use its name and idea to sell its goods or services. In return, the franchisee typically pays an upfront fee and ongoing royalties.
There are several advantages of buying a franchise vs. starting your own business. Get to know the potential benefits so you can make an informed decision about whether a franchise is right for you.
Key Points
• A franchise is a business model in which you buy the rights to use the name, brand, and operational model of another business.
• Franchise owners may enjoy an established customer base and built-in name recognition.
• They often receive support from the parent company in the form of ongoing training, marketing support, and collective negotiation for supplies and equipment.
• In general, opening a franchise may be less risky than starting an independent business.
• Lower risk may make it easier for franchise owners to secure financing for their business.
Built-In Brand Recognition and Reputation
When you start a business from scratch, you must work hard to get the word out about the goods and services you offer. This can take a lot of marketing effort and years of building trust with a customer base. It’s no wonder that advertising is one of the major costs of starting a business.
A franchise, on the other hand, is leaning on the brand recognition and reputation of a well-known business. There is likely already an active customer base, and with it, a built-in understanding of what the business is and what it provides. Customers already know what to expect.
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Proven Business Systems and Operations
A franchise is already a proven business model. You don’t have to develop it from scratch, nor do you have to spend the time to explore the ways to operate the business successfully. Those steps have been taken for you.
Depending on how the business is structured and the agreement you make with your franchisor, you may get everything you need to operate the business, including equipment, supplies, and detailed business processes.
Other franchises may not offer a turnkey system. However, you will still have access to institutional knowledge, whether that is provided to you in material form or through the business founder.
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Training and Support Programs
As part of the operational assistance a franchisor may offer, there may be training and ongoing support to help you manage your business and bring on employees. Training will typically cover daily operations, the use of equipment, point-of-sale software, business systems, and other daily tasks.
Training programs are available to help the franchisee open their business and then on an ongoing basis to help ensure the continued success of business operations.
One advantage of a franchise is that franchise owners may be joining an existing network of other franchise owners. In addition to the ongoing support offered by the franchisor, this group may be able to share best practices and tips they have learned.
Marketing and Advertising Assistance
The franchisor will likely supply marketing strategies, materials, and techniques to drive sales effectively. For example, they might provide signage to include in ground locations or guidelines for advertising in local markets and budgeting suggestions.
Franchisees who are part of large chains can take advantage of the parent company’s broader marketing campaigns, which could include regional or national advertising in print, on the radio, online, or on television.
Established Supply Chains
Maintaining a steady supply chain can be a big challenge for independent businesses, who must establish relationships with trusted vendors and negotiate prices on their own. Franchisees can often take advantage of established supply chains. What’s more, the parent companies can often negotiate for better deals on products purchased in bulk. These lower costs could translate to lower operating costs for franchise owners.
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Financial Benefits and Performance Data
In addition to the financial benefits provided by immediate market share and increased purchasing power, franchises may benefit from better access to loans for startup businesses. A franchise may carry lower risk than a brand-new business. A franchisee is buying into an established business model, so they have lower failure rates than other entrepreneurs.
The low risk of opening a franchise may make it easier to secure loans, such as SBA loans. Some franchisors even have an in-house financing arm, though these options may not offer the lowest interest rates.
Franchisors may also offer access to performance data that gives franchise owners insight into marketing data, costs, and cash management. With this data on hand, owners can work with franchisors to help ensure continued growth and success.
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The Takeaway
A franchise may provide many advantages for individuals looking to start a business of their own, including an established customer base and ongoing support from a successful parent company in the form of training, marketing support, buying power, and access to performance data.
They are not without disadvantages. For instance, they often have high startup costs, ongoing royalty payments, and franchise rules that owners must continue to abide by. Weigh potential benefits against these risks to help determine if owning a franchise is the right business move for you.
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FAQ
What are the main benefits of buying a franchise?
The main benefits of buying a franchise are access to a successful business model, an established customer base, and ongoing support from the parent company and the network of other franchise owners. Franchisees may also benefit from the brand recognition and marketing resources of an established company.
Is buying a franchise less risky than starting a business?
Buying a franchise may be less risky than starting a business of your own, because a franchise already has a proven business model and name recognition. Franchisees may also benefit from established systems, training, and ongoing support from the franchisor.
What type of support do franchisors provide?
Franchisors may provide support in a variety of ways, including training, marketing support, the ability to collectively negotiate the purchase of supplies, and access to business data. This support can help franchisees navigate day-to-day operations and make informed business decisions.
How does franchise marketing support work?
Franchises may offer marketing materials, including strategies and a budget. Franchisees may also benefit from regional and national marketing campaigns in print, online, on the radio, or on television.
Are franchises more profitable than independent businesses?
Franchises are generally more successful than small businesses. Industry reports show that after two years, 92% of franchises remain in business. After five years, 85% are still open. Compare this to independent businesses where only 50% survive five years.
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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
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