Starting a Business vs Franchise

Explain the differences of establishing a vexation from scratch and setting up a franchise. Evaluate the success of franchises in Australia (refer to examples). There are meaningful differences between establishing a smart transaction and setting up a franchise. Starting a business from scratch often takes a tenacious time and a large amount of capital to accomplish, but the rewards nookie be substantial. A franchise is a business that is licensed to switch under a recognised brand name for throwment of a fee (e. g. McDonalds, 7-11, etc). A franchisee purchases the franchise from the franchisor and operates under their name while salaried fees.The featureors involved in choosing one of these two options differ considerably and accommodate the amount of hazard, cost, operations and constitution. Establishing a new business involves the highest amount of risk due to the entrepreneur being solely responsible for everything that occurs in the business. In addition, there is a significant threat of failure for any new business which can proceeds in huge losses for the business possessor. Without a previous business reputation, it may prove difficult for entrepreneurs to fixate finance which in effect significantly limits their access to funds to pay for establishment be.Starting a new business gives the owner greater envision over all key decisions and operations, as a result allowing the owner to set up the business exactly how they wish. Establishing a reputation for a new business is a slow process since a customer base and marketing campaign needs to be developed to generate sufficient sales for the firm. As a result, a new business will experience a slow growth in profits and may not be able to achieve a high level of profits at the start. Setting up a franchise presents the lowest risk due to already being schematic and generally selling wide recognised products.The costs associated in buy a franchise vary significantly depending on a fl eck of factors much(prenominal) as type and size. Due to the general success of a franchise, it is much easier for a franchisee to obtain finance. However, franchisees must pay ongoing costs such as royalties to the franchisor which may lead to a reduction in overall profits. Setting up a franchise heavily restricts the owners control over business operations which prevents them from making their own decisions. This is due to the fact that the franchisor has total control over the business operations and ultimately determines how the owner runs the franchise.It is also much easier for a franchisee to generate sales due to the widely established reputation of the franchise and the products sold may already be advertised and marketed by the franchisor. Most franchises have been extremely successful in Australia and have become the fastest growing area of small business in 2004 there were approximately 850 franchise operations in Australia. Franchises such as Gloria Jeans and Jims Mo wing have grown tremendously in the past some years between 1999 and 2004, the number of franchises grew by 25%.This is due to the effective business formula, well-recognised name and established trademarks of franchises which have attracted numerous investors in Australia. some other reason regarding the enormous of franchises in Australia is the fact that most of them offer wide training and support to franchisees. For example, McDonalds provide franchisees with uniforms, staff training packages, the ingredients and equipment for return and conducts extensive advertising on their behalf. As the success of franchises continues to grow in Australia, it is becoming an attractive option for many potential entrepreneurs in scratch line a business.