If you’re hesitating between these two models, here are a few tips to help you compare and decide.
Long regarded as the model to follow par excellence, the start-up is the talk of the town. Between the race for unicorns and historic fund-raising campaigns, this form of entrepreneurship regularly makes the headlines. You’d almost forget that this type of company is not the only way to be a successful entrepreneur.
In fact, recent studies seem to show that start-ups no longer occupy first place in the hearts of entrepreneurs. According to a Bpifrance survey conducted by OpinionWay and published in March 2023, the people questioned would prefer to go into the crafts, hotel and catering or trade professions rather than the tech sector.
Has the time come for the franchise to establish itself as a model to follow? What’s the best choice for a winning financial investment? Let the match begin.
Start-ups: for creative, visionary entrepreneurs
Start-ups generally have rapid growth potential. Using innovative ideas and disruptive business models, they can disrupt established markets and achieve exponential growth in a short space of time. As a general rule, start-ups focus on innovation and creativity, and are a perfect match for certain personalities eager to tackle new problems.
Another advantage is that it’s often possible to launch a start-up with very little money down, which can be supplemented by a wide range of financing support schemes (a French specificity). It’s all very inspiring, except that… there are many called but few chosen.
In reality, this model presents greater uncertainty as to the company’s viability and profitability. Many ventures end in failure, as entrepreneurs face daunting challenges: concept development, competition, human resources management, marketing, customer acquisition…
Another point to bear in mind when starting out: isolation. It’s a complicated situation to manage in the event of a setback, even if at first it may seem exhilarating to be the sole master on board. And don’t forget that access to financing remains complex: investment funds are considerably reducing their equity investments.
The result? The risks often outweigh the benefits.
Franchising: being your own boss while mitigating risk
The main advantage of franchising, on the other hand, is that it enables anyone to launch a business without having an innovative idea, while benefiting from a proven model that can simply be duplicated. Because it’s based on a simple principle – the repetition of success – it represents a proven profitability model, provided the newcomer has the means to succeed.
Insee statistics speak for themselves: the survival rate for this type of company is 80% after five years – compared with 50% for their traditional counterparts. What’s more, the franchisee, while independent, is never completely alone. At any time, they can turn to their network or peers for support, advice and guidance.
Beware, however: while this model is objectively much more reassuring, it often requires a significant initial investment, even if this varies from company to company and from sector to sector. Applicants must pay a high entrance fee. Throughout the term of the contract, the franchisee must also pay royalties to the franchisor in exchange for territorial exclusivity and brand use.
It’s also essential to choose your network carefully, because not all are equal in terms of support and reputation. Lastly, while franchisees remain their own bosses, they still have a few things to answer for. For example, the brand will have a say in the store’s visual identity and how its know-how is used.
Neither model is really superior to the other. While the latter seems less risky, the former offers greater autonomy. However, franchising stands out for its security and chances of success. This makes it an excellent investment choice with every chance of proving a winner.
Franchising: being your own boss while mitigating risk
The main advantage of franchising, on the other hand, is that it enables anyone to launch a business without having an innovative idea, while benefiting from a proven model that can simply be duplicated. Because it’s based on a simple principle – the repetition of success – it represents a tried-and-tested profitability model, provided the new entrant has the means to succeed. Insee statistics speak for themselves: the survival rate for this type of company is 80% after five years – compared with 50% for their traditional counterparts. What’s more, the franchisee, while independent, is never completely alone. At any time, they can turn to their network or peers for support, advice and guidance.
Beware, however: while this model is objectively much more reassuring, it does require a significant initial investment, even if this varies from company to company and from sector to sector. Applicants must pay a high entrance fee. Throughout the term of the contract, the franchisee must also pay royalties to the franchisor in exchange for territorial exclusivity and brand use. It’s also essential to choose your network carefully, because not all are equal in terms of support and reputation. Lastly, while franchisees remain their own bosses, they still have a few things to answer for. For example, the brand will have a say in the store’s visual identity and how its know-how is used.
Neither model is really superior to the other. While the latter seems less risky, the former offers greater autonomy. However, franchising stands out for its security and chances of success. This makes it an excellent investment choice with every chance of proving a winner.
