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Entrepreneurship vs. Franchising

Given the state of the economy, it’s perhaps a good time to reconsider some of the myths of entrepreneurship to see whether the small business dream holds the same allure it once did. Certainly the days where all you needed to get investment in an internet business was a quirky idea are gone the way of the buffalo. If anything, the death of this kind of entrepreneurship makes the best possible case for franchising.

Some of these thoughts came to us after reading a highly interesting piece in the Harvard Business Review by Walter Kuemmerle, an associate professor at the Harvard Business School in Boston. Although he was writing in 2002, most of the points Kuemmerle makes are still relevant in 2009, if not more so.

In his piece, Kuemmerle seeks to outline the various risks and challenges that a prospective entrepreneur will have to take on to truly succeed. Kuemmerle wants to force business-people to look in the mirror and ask themselves: is this really the model I want to follow to achieve my personal business dreams? The converse to his questions are: is franchising a better business model?

Kuemmerle outlines two entrepreneurship risks/questions that we hadn’t even considered:

Are you comfortable stretching the rules? Are you prepared to make powerful enemies?

The former is particularly compelling argument against entrepreneurship. Those first two or three years of getting a business going involve taking huge financial risks, and in many cases, hounding off creditors, juggling debt on personal credit cards and even leveraging your family home in order to keep the business afloat. This is a reality that most entrepreneurs simply accept, but it brings great risk and peril to your home life, especially in this recession. But as Kuemmerle says, most success stories for start-up’s he knows include the use of outrageous tactics. Or Kuemmerle later asks: “Do you have the stomach for subterfuge?”

He also points out the fact that having a truly successful start-up often means brushing up against powerful enemies. Kuemmerle adds three other points about the need to be flexible, decisive and incredibly patient to make it as entrepreneur.

Now while all of these skills are generally needed to run a strong small business, the fact is the franchising model eliminates many of the risks and indeed dangers that are part and parcel of launching a start-up. With a franchise, you have a proven business plan and a source of support and knowledge from the franchisor. Some entrepreneurs may disagree with the concept of a franchise fee, but really it is nominal compared to some of the outrageous leaps involved in entrepreneurship. It’s a time for hedging your bets and as Kummerle concludes:

“Being an entrepreneur isn’t for everyone, and even those who have the right stuff find the path to success much rougher, and usually, much longer than they had anticipated.”

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