Independent business versus franchise decisions

Maryland residents who wish to start a business may want to look at two models: independent and franchise. Either type of ownership model of business can succeed. There are factors associated with the decision to buy either one, and those should be carefully weighed prior to any action.

A franchise owner is under the control of a parent company, which controls what services and products the new business can offer with little opportunity for independent decisions by franchise owners. The upside is that those products and services have already been tested in the marketplace. An independent business owner has autonomy and can strike out in new directions with services based on preferences or market changes. However, this typically means less security.

There are also differences in costs between the two models. Even though franchisors may ask for less money for business start-up, they will continue to collect royalties in addition to buy-in fees. An independent business will likely require more start-up money, but the owner will have more control over deciding when and how to spend money for renovation or expansion, issues that often are decided by the franchisor.

Franchises have immediate brand recognition. While this can be beneficial, any negative publicity could hurt all franchise owners associated with the brand as well. An independent business owner will not have these concerns. Franchisors provide operational resources such as business system access, ready suppliers and other services. Independent owners have to set up all aspects of the business from scratch, but they have control of their company. Both models of business can succeed or fail.

It could be helpful to consult an attorney about business formation for a new business, particularly for a start-up company. A lawyer might be able to clarify what entity forms the company could take. Business start-ups require licensing, and a lawyer could help with that process.

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