The economic downturn adversely affected many in the workforce.  For those who lost their jobs, the loss of employment meant having to make new choices.  Do they try to find a job working for someone else, or do they take any money they had saved and start down the road to entrepreneurship?  If those seeking to restart their careers choose to become an entrepreneur, their entry into business ownership could come in a couple of forms.  One can start a business from scratch, buy an existing business, or buy a franchise.  What is the difference between becoming an entrepreneur and becoming a franchisee?  Are they one and the same?

An entrepreneur is someone who has assumed a financial risk in order to start a new business or in order to improve upon an existing business concept.  To truly embrace the entrepreneurial spirit one needs to think creatively, have a desire to innovate, and have the personal drive to build your business into a success.

A franchisee is also someone who has assumed a financial risk; however, this comes from buying into a franchise. When you enter into a franchise, you do so by entering into a license agreement with the franchisor.  This allows the franchisee to market the products and services of the parent company within the area of the certain location.  The franchisor, for their part, has grown a brand and a working business concept that they are then selling to franchisees.  The franchisee uses the name, trademarks, and logos of the parent company while following the guidelines established by the franchisor.  The franchisee maintains access to these rights by paying an ongoing royalty fee.

So how are these two types of business ownership the same?

• Whether you buy into a franchise or not, the research required before a purchase will be nearly the same.  You will be looking at financial records, deciding on locations, deciding on an industry, and looking into marketing.
• Any business owner needs to think like an entrepreneur.  Your creativity, innovative spirit, and drive are what will see you though.
• You will need to know your territory inside and out.  The only difference for a franchisee comes from sharing this responsibility with the franchisor.
• If you buy an existing business, a franchise, or start a new business from the ground up-in all ways you are acting on a business opportunity.
• When entering into any new business opportunity you will be taking on a financial risk.
• In any business you will be the manager, the supervisor of staff, and the one responsible for maintaining financial records.
• A franchisee might use a system of operation designed by the parent company, but all business owners are still ultimately responsible for the day to day operation of their business.
• As a business owner or franchisee, you are the one who retains financing, pays leases, orders inventory, and maintains relationships with vendors and suppliers.

Just like any entrepreneur, a franchisee functions as the owner of the business.  If you do choose to become a franchisee, realize that this doesn’t exclude you from the ranks of other entrepreneurs.  Your role as an owner in any business situation will be the same.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com