Franchise vs. Starting Your Own Business: How to Decide

As an aspiring business owner, you’re ready to take the leap to become your own boss. This is a brave new venture you’re starting on, and it’s important that you consider carefully how you want to go about it. Starting a business that belongs to you and only you may be the best choice if you like to be in complete control of your work, but flying solo has considerable risk to it.

In an effort to mitigate such risks, you may want to consider franchising instead. While franchising has its own challenges to overcome, it offers several benefits you wouldn’t find when starting a business alone.

Franchising continues to show strength in the U.S. economy: according to the International Franchise Association’s 2024 Economic Outlook, the industry generated nearly $894 billion in output, a 4.1% increase from 2023, and added more than 221,000 jobs. Independent startups, meanwhile, remain more volatile: nearly half close within five years.

Startup Pros and Cons: Independence with Higher Risk

The Benefits of Starting a Business on Your Own

When comparing a franchise vs a startup, some businesspeople may default to going solo. Opening a startup business independently has the benefit of giving you complete autonomy. You set your schedule, create your business plan, decide on a location, hire your staff, and own all profits after expenses.

If you have a unique business idea that doesn’t fit into any company’s pre-existing plan, then opening a startup might be your best option. Another advantage: upfront costs are often lower than franchise fees.

The Challenges of Going Independent

Of course, full control also means full responsibility. You’ll need to:

• Develop a viable business idea and plan.
• Secure funding and manage finances.
• Create a marketing strategy from scratch.
• Build a support network (attorney, accountant, insurance, etc.).

And the risks are significant. According to U.S. Bureau of Labor Statistics data, about 20% of new businesses fail within the first year, 50% within five years, and only one-third survive 10 years. Funding gaps, lack of market demand, and limited management experience are frequent culprits.

Franchise Pros and Cons: Support with Boundaries

Why Franchising Appeals to Entrepreneurs

Franchising strikes a balance between independence and guidance. By becoming a franchisee, you open your own business with the backing of a company that has a proven model. Key advantages include:

• Training and onboarding—especially valuable for first-time owners.
• Brand recognition—customers already know and trust the name.
• Marketing support—franchisors often run national or regional campaigns.
• Purchasing power—discounted supply chains thanks to scale.
• Peer network—guidance from fellow franchisees.

The payoff is measurable: According to a recent study, franchises have survival rates of 92% after two years and 85% after five years, compared to about 50% for independent businesses. Termination rates for franchises are only about 3.9%, a fraction of startup closures.

The Drawbacks of Franchising

No model is perfect. Some franchises are expensive to enter, especially those with major name recognition. Ongoing royalties – commonly 4–12% of revenue – reduce net profits. Franchisees must also operate within brand standards, which limits flexibility. And contracts are binding, often spanning 10+ years, making it a serious long-term commitment.

Financial Considerations: Costs, Fees, and ROI

One of the biggest differences between starting independently and franchising is financial.

• Startups: Can begin with modest capital (sometimes as little as a few thousand dollars, depending on industry), but require access to ongoing funds for growth and stability.
• Franchises: Typically involve higher upfront investments plus recurring fees. Franchise Disclosure Documents (FDDs) often list initial investments ranging from tens of thousands to millions, depending on brand and sector.

Despite higher buy-ins, franchises may reach profitability faster due to established demand and systems. Financing can also be easier, as lenders often favor proven brands.

Risk vs. Reward: Comparing Outcomes

Bottom line: Franchises provide stability at a cost; startups offer flexibility but with higher risk.

Making Your Choice: Franchise vs. Startup

The question of starting a franchise vs. starting your own business is ultimately one only you can answer. Both models are viable: what matters is which aligns with your personality, finances, and long-term goals.

Consider this framework when choosing between a franchise vs. a startup:

• If you’re experienced, have a unique business idea, and want complete autonomy: startup.
• If you’re new to business ownership, want guidance, and prefer reduced risk: franchise.

Quick Checklist

• How much capital do I have available?
• Do I want full creative control or proven systems?
• How much risk am I comfortable with?
• Do I value speed-to-market and brand recognition?

FAQs About Franchises vs. Startups

Is it cheaper to start a business or a franchise?
Generally, startups require less upfront capital, while franchises are more expensive but can yield faster ROI.

How profitable are franchises compared to startups?
Profitability depends on industry. Franchises often deliver steadier returns, though royalties reduce margins.

Which industries are best for franchising?
Home services (including home improvement), personal services, quick-service restaurants, automotive, and healthcare continue to lead.

Can I start a business now and franchise it later?
Yes. Many successful brands began as single independent businesses that later scaled through franchising.

Franchise with ProSource Wholesale

If you’re leaning toward franchising, we’d love to talk. ProSource Wholesale has more than 30 years of proven experience supplying flooring, kitchen, and bathroom products to professional contractors using a unique membership business model.

• Flexible scheduling tailored to your market.
• B2B focus with no need to perform remodeling work yourself.
• A support system rooted in franchisee success.

Contact us today to learn more about how franchising with ProSource can help you achieve your business ownership goals.