Starting your own business is the dream. The freedom. The independence. The big idea you’ll build from scratch.
But here’s the reality: Most startups don’t survive.
According to the U.S. Bureau of Labor Statistics, about 20% of small businesses fail within the first year and nearly 50% close within five.
On the other hand, franchises often flip the script. They come with a brand, systems and support — but also fees, guardrails and less creative freedom.
So, which path actually builds wealth on your terms? Let’s break it down.
The good and the bad of starting your own business
If you thrive on uncertainty, innovation and big swings, starting fresh can be thrilling. But the reality is, it’s not the fastest or safest way to a stable income.
Pros of starting your own business
- Full creative control: You own the vision, brand and direction
- Potential for unlimited upside: Build something truly original that could scale
- Personal satisfaction: Few things beat the pride of creating something from nothing
Cons of starting your own business
- High risk, high burn: Nearly half fail within five years and access to capital is harder
- Steep learning curve: You’re responsible for marketing, ops, HR, finance, compliance … all of it
- Slow ramp-up: Getting brand recognition and customer trust can take years.
The advantages and disadvantages of buying a franchise
If you want entrepreneurship without reinventing the wheel, franchising can be your path to profitability and stability. Here are the pros and cons.
Pros of franchise ownership
- Proven model: You plug into a business blueprint that’s already been tested
- Brand recognition: Customers often trust franchises on day one
- Support and training: Marketing, supply chain and ops systems are often built-in
- Financing benefits: Lenders may view franchises as less risky than new startups
Cons of franchise ownership
- Franchise fees and royalties: You pay ongoing costs for the system
- Less creative freedom: You’re working within someone else’s playbook
- Market saturation: Pick the wrong brand or location, and your growth stalls
Financial and ROI comparison: Franchising vs. starting a business from scratch
Money talks — and whether you go franchise or solo startup, the way dollars flow in and out will shape the overall profits that affect your wealth-building journey.
Startup costs
Starting from scratch isn’t always cheaper. You just absorb costs in trial-and-error rather than franchise fees.
Franchise: Typically ranges from $50,000 to $500,000+, depending on industry and brand. That includes your franchise fee, buildout, equipment, working capital and initial marketing. Some “home-based” or service franchises can be as low as $10,000, while restaurant concepts can cross $1 million.
Startup: Potentially cheaper upfront if you bootstrap — but hidden costs creep in. Brand development, website, inventory, legal, hiring and marketing can easily add up to $50,000–$200,000 according to Stripe. Unlike franchises, you won’t have bulk-purchasing power or proven playbooks to streamline spend.
Revenue ramp-up
Franchise: A franchise with strong brand recognition often sees sales traction within months, not years. Industry averages show many franchisees reach break-even in 12 to 18 months.
Startup: Most independent businesses take two to three years to stabilize revenue. It’s harder to attract customers without a known brand, and marketing is a heavier upfront lift.
Operating margins
Yes, royalties are a factor, but franchisees often make up for it with higher, faster revenue.
Franchise: Expect to pay royalties of 4–12% and marketing fees of 1-5%. That reduces margins — but you gain operational efficiency, supply chain discounts and established pricing power. For many food or retail franchises, net margins land around 10–15%. Service franchises (cleaning, fitness, consulting) can hit 20%+.
Startup: Higher potential margins (no royalties), but also higher costs for marketing, staff training and systems. Average small businesses often net 7–10% until they scale.
Return on investment
Franchises often deliver steadier, more predictable ROI. Startups may offer higher potential upside — but that comes with much longer odds.
Franchise example:
- Initial investment: $150,000
- Average annual revenue: $500,000
- Net profit margin: 15% → $75,000/year
- Payback period: ~2 years
- ROI over five years: ~150% (excluding resale value of the business)
Startup example:
- Initial investment: $100,000
- Average annual revenue: $300,000 (after ramp-up)
- Net profit margin: 10% → $30,000/year
- Payback period: ~3.5 years
- ROI over five years: ~50% (with higher volatility — could be 0% or 500% depending on execution)
Scalability and wealth building
Franchise: True wealth comes with multi-unit ownership. Many franchisees expand into three to 10+ locations, multiplying income streams with a playbook that scales.
Startup: Scalability depends on your model. A local business might top out at a modest six figures in profit. A tech startup could scale wildly — but again, odds are stacked against it.
Key takeaway: Franchises are like buying into a “wealth treadmill” that’s already running — lower risk, faster ROI and scalable through replication. Startups are a blank canvas: unlimited upside, but you’re also mixing the paint and stretching the canvas yourself.
So … which option is better?
Neither path is automatically “better.” It’s about your goals, risk tolerance and lifestyle vision.
- Crave creative freedom and willing to take big swings? Startup life may be your calling.
- Want structure, support and a proven model with lower risk? Franchising can be your best option for building wealth.
The key isn’t which is “right,” but which is right for you.
Let us help make the right decision for your goals
At Franchise Sidekick, we get it: this decision can feel overwhelming. That’s why we cut through the noise with:
- Simplicity: Clear guidance without jargon
- Safety: Data-driven insights, so you avoid costly mistakes
- Support: A no-pressure team helping you explore franchises aligned with your goals
The result? You gain the freedom and income you want — on your terms.
Schedule a call with a Sidekick Advisor today to see how franchising could fit into your wealth-building journey.
