Franchise or Startup? Two Great Choices for MBA Entrepreneurs Revised
When starting a business, many entrepreneurs deliberate whether it's better to invest in a franchise or to go from scratch. Good reasons exist on both sides. But the final decision depends on how entrepreneurs weigh their options. Those with an MBA may be better equipped to make an informed choice.
MBA grads must understand advanced subjects that offer knowledge essential to entrepreneurs. Consider how prepared an entrepreneur would be to evaluate a franchise or to pitch investors a thoroughly developed startup armed with the right knowledge? The online Master of Business Administration (MBA) with an Entrepreneurship and Family Enterprise Concentration program from LSU Shreveport provides foundational knowledge through courses that cover topics like the following:
- Managerial Use of Accounting Data
- Economic Analysis for Management
- Financial Management
- Management Information Systems
- Organizational Behavior
- Organizational Strategy and Policies
- Marketing Strategy
Without the depth of knowledge acquired in such courses, and much more offered in an MBA program, an entrepreneur likely would need a business consultant to help determine the potential of a franchise or startup concept.
But even if an entrepreneur has such knowledge, many issues remain when thinking franchise versus startup, including the entrepreneur's personality, goals, intentions, and talents.
Characteristics of a Franchise:
- It's a business in a box, designed to be up and running quickly once a contract is signed.
- Product development and rotation are typically managed by the franchisor.
- Most branding and marketing also are handled by the franchisor, who will offer guidance and provide materials for local, regional or national campaigns.
- Support from the franchisor is available when you need answers to questions or advice.
- Franchisors want their franchisees to succeed and to continue building their brand (and paying those royalties!).
- There may be less risk with a franchise compared to an independent startup because of the strength of the franchisor's reputation and customer loyalty.
A franchise may not be your best choice if you:
- Consider yourself creative and are driven by a desire to bring your ideas to life
- Have a well-conceived business concept
- Would be uneasy paying royalties out of your profits
- Are confident you have:
- The skills and will necessary to build a business from the ground up
- A concept that will succeed and attract funding
- The grit to see it through
Characteristics of a Startup
- An entrepreneur has a great concept for a new enterprise, not a business in a box.
- The owner has total control to create an enterprise from scratch without the standardized approach of a franchise.
- The business plan has unique components such as overall strategy, products, pricing, production approach, branding, and marketing strategy.
- Owners closely watch spending and pour all profit back into the business.
- The ability to pivot quickly to add or tweak products, adjust strategy, or change marketing.
A startup may not be your best choice if you:
- Have any doubts about:
- Your leadership abilities
- The viability of your concept
- Your capacity for risk-taking
- Don't have adequate funding lined up:
- To legally establish the business
- To hire staff
- To sustain operations until the business starts producing revenue
- Are not confident with tasks you may have to take on, such as:
- Pitching to investors
- Pursuing business development
Big Decisions Take Lots of Thought
The decision to open a franchise or a startup requires intensive soul-searching, funding, and a willingness to assume risk. As you consider which way to go, honestly examine yourself and your feelings. And you also may want to seek the wise counsel of a mentor or associate who knows you well.