Is There a Difference Between Entrepreneurs and Franchisees?

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Franchisees and Entrepreneurs – What’s the Difference?

Running your own business involves a significant amount of dedication and hard work, but what credentials do you need to be considered an entrepreneur? And do franchisees fit under the same umbrella? Here, we explore the difference between entrepreneurs and franchisees.

The business world can be a confusing place, with lots of jargon we don’t understand. Entrepreneur and franchisee are two words often used in the franchising industry - but what do they actually mean? What are the characteristics of an entrepreneur and do you need particular experience to qualify as one? Let’s find out. 

The difference between entrepreneurs and franchisees

All franchisees are entrepreneurs, but not all entrepreneurs are franchisees...

Anyone who has the ambition and courage to launch a business and take responsibility for its performance can safely be described as an entrepreneur. Franchisees make up a sub-category within this group. 

Franchisees set up a business under an established brand and follow its guidelines and strategies. They pay for the rights to benefit from the company’s reputation, and receive training and support from their franchisor. 

But for all the differences between entrepreneurs and franchisees, there are plenty of similarities. Both roles require vision, initiative and bags of motivation. 

Unlike employees, entrepreneurs and franchisees take accountability for difficult decisions and must make sure everything in their business is shipshape. If you miss a weekly or monthly sales target, there will be direct consequences for your revenue and take-home pay. 

Why entrepreneurs make great franchisees

Franchising requires a very similar set of skills to starting your own independent business as an entrepreneur. In both roles, it’s essential you have the competency to lead a business and make your own decisions.

If you have entrepreneurial experience, you should certainly consider becoming a franchisee. You’ll get all the benefits of joining a franchise, and have someone to turn to if you’re faced with challenges. Plus, you may have the opportunity to launch additional business units over time if you want to expand your operations. 

Are all entrepreneurs suited to franchising?

Not necessarily. To be a franchisee, you must be able to adhere to a strict set of rules when it comes to managing your business. The success of the franchise as a whole relies on its ability to provide a consistent product or service, so customers know they can depend on it. It’s in the interest of both the franchisor and the franchisees to make sure every unit is run in the same way and uses the tried and tested formula. 

If you belong to a restaurant franchise, you’ll have to stick to the same decor and menu as the other branches. If it’s a home care business, you must have the same customer values and techniques as your fellow franchisees. 

As a result, the franchise system will not necessarily suit every entrepreneur. Some people prefer to have complete control over their business and learn as they go along. 

This isn’t to say franchisees have no say in the company, as any good franchisor takes on suggestions from investors and allows them to leave their own personal mark on their unit. 

Do you need to be an entrepreneur to become a franchisee?

Many franchisors do not expect franchisees to have experience in building businesses from scratch - that’s not what franchising is all about. But they do value candidates who can demonstrate determination, ambition and passion for the franchise and industry. 

In fact, being an experienced entrepreneur can actually be a warning sign for franchisors. They will want to be confident you’re comfortable working in a structured environment with set processes. 

Why franchise?

  • Franchising can be an affordable option for budding entrepreneurs who would struggle to saddle the cost of launching an independent business from scratch.

  • By completing training programmes and interacting with experienced professionals , franchisees can acquire new business skills and knowledge.

  • Banks are more willing to lend to entrepreneurs who are using a franchise model to start a business, as they’ll be working under a brand that’s already seen widespread success. For solo entrepreneurs, it’s much more difficult to convince people their business plan will take off and reach its targets. Banks want to be sure you’ll be able to repay their loan plus interest in a set timeframe. 

  • Joining a franchise is less risky than starting an independent business. You don’t have to come up with an innovative idea you hope will pay off; you can put your money into a concept you know is profitable already. In short, a new independent business is more likely to fail, and if it does, the entrepreneur can incur substantial losses and may even become bankrupt. 

  • If you invest in a franchise with a significant number of units already up and running, you’ll gain access to a large support network. Every time your franchisor organises an event or exhibition, you’ll have the chance to mingle with fellow franchisees and share ideas and advice. 

  • Franchises often have significant economies of scale, saving franchisees money when it comes to buying stock and other products. The bigger the franchise network, the larger the inventory needed across the business units, and the higher the discount franchisees may be able to access from suppliers.

Franchise opportunities

Think you’ve got what it takes to be a franchisee? Great! We have hundreds of fantastic investment opportunities for people who’d like to launch a business under a proven business model. Use the menu to browse your options and filter them by industry, investment level or geographical location. 

You can also brush up on your franchising knowledge by reading more of our informative articles. Or see our resources for franchisees for information specific to investors. 

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