Know the difference between franchising and buying a business







Before you decide if one of these options is right for you, make sure you know the basics of franchising and buying an existing business. The main difference between franchising and buying an existing business is the level of control you’ll have over your business.



Franchising gives you more guidance but less control




A franchise is a business model where one business owner (the “franchisor”) sells the rights to their business logo, name, and model to an independent entrepreneur (the “franchisee”). Restaurants, hotels, and service-oriented businesses are commonly franchised.

Two common forms of franchising are:

  1. Product/trade name franchising: The franchisor owns the right to the name or trademark of a business, and sells the right to use that name and trademark to a franchisee. This style of franchising normally focuses on supply chain management. Typically, products are manufactured or supplied by the franchisor and delivered to the franchisee to sell.

  2. Business format franchising: The franchisor and franchisee have an ongoing relationship. This style of franchising normally focuses on full-spectrum business management. Typically, the franchisor offers services like site selection, training, product supply, marketing plans, and even help getting funding

When you buy a franchise, you get the right to use the name, logo, and products of a larger brand. You’ll also get to benefit from brand recognition, promotions, and marketing. But, it also means you have to follow rules from the larger brand about how you run your business.



Buying an existing business gives you more control but less guidance




Buying an existing business is exactly what it sounds like. The buyer typically takes over full ownership of the business. The largest advantage is having an existing blueprint that can include important factors like an established customer base, defined operating expenses, and fully trained employees. Regardless of business type, almost any kind of business could be bought or sold.

When you buy an existing business, you typically get complete control over its direction. However, with no set vision, infrastructure, or external guidance, your business could struggle as you figure out the best way to run things.

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Iowa Western Community College

2700 College Road

121 Ashley Hall (Park in Ashley Hall Visitor Parking)

Council Bluffs, Iowa 51503

712-325-3350

Sue Pitts - spitts@iwcc.edu

Michael Mitilier - mmitilier@iwcc.edu

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Funded in part through a cooperative agreement with the U.S Small Business Administration (SBA). All opinions, conclusions or recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA