The three routes
How the routes compare
| What to compare | Start | Buy | Franchise |
|---|---|---|---|
| Capital needed | Lowest for a service business, very high for manufacturing. It depends on the type. | The price, plus working capital after transfer and the fees of an attorney and an accountant. | The franchise fee, plus fit-out, equipment, stock and working capital. The fee is often the smallest part. |
| Time to first income | Slowest. Income starts from zero. | Fastest. The business is already trading. | Months. Fit-out and opening come first. |
| Idea risk | All yours. | Removed. The business already has customers. | Reduced by a proven model. Your unit’s location is still your risk. |
| What you inherit | Nothing, good or bad. | Customers, staff, contracts and whatever the accounts do not show. | A system and its obligations: royalties, levies and supply rules. |
| Control | Full. | Full after transfer, within what you bought. | Limited. The franchisor sets standards and often suppliers. |
| Ongoing cost to others | None. | Debt repayments, if you borrowed to buy. | A royalty, typically 5 to 12% of turnover, plus an advertising levy, typically 1 to 4%. |
| Biggest trap | Building demand more slowly than your runway lasts. | Overpaying, or inheriting problems you did not verify. | Royalties come off turnover, not profit, so the margin left after royalty, rent and staff decides it. |
| Law to know first | Company registration, tax and compliance. | Section 197 of the Labour Relations Act, Section 34 of the Insolvency Act, and the warranties in the purchase agreement. | The disclosure document, which the franchisor must give you at least 14 days before you sign. |
How to choose
The comparison does not produce a winner, because the right route depends on which constraint binds for you: capital, time, control or the lack of an idea. Match your situation below, then check the choice against the numbers.
- You can describe a specific customer and offer, and have more time than capital: start, usually with a service business first. What business should I start sets out the options.
- You have capital, want income sooner and are willing to verify a seller’s numbers: buy. Budget for an attorney and an accountant as well as the price.
- You want a proven system and support, and can live with royalties, standard operating rules and limited control: franchise, once the disclosure document and the numbers hold up.
- You have no idea yet: begin with discovery rather than a route. It considers franchise and property alongside the other business types.
- Idea risk worries you most: buying or franchising removes it, but adds a price and obligations. Neither is safer, only different.
The route also has to suit you. A franchise restaurant is a demanding operating job, and a business you cannot run yourself moves the risk to whoever does.
If you are still deciding whether to leave employment at all, read should I leave corporate and start my own business first, and can I afford to leave my job for the money. To test a specific idea before you commit to a route, read will my business idea work.
Hybrid routes
The three routes overlap. Buying an underperforming business where your skills fix the gap gives you trading revenue and a place to apply what you know, at a lower price than a healthy business. Buying an existing franchise unit from a current franchisee gives you a trading unit and a system, and carries both sets of checks: the seller’s numbers and the franchise agreement. Starting with a small service business can build the cash and the customers to move later into a stock-heavy or premises-based one.
Run the numbers before you choose
- Starting: work out break-even volume in the break-even calculator and how long your savings last in the runway calculator.
- Buying: test the asking price in the Fair Price Evaluator, which takes three years of the seller’s financials and gives an indicative fair value range.
- Franchising: work backwards from the income you need in the franchise calculator to the turnover the unit must generate after royalties, food cost, staff and rent.
Where to start
Choose the route closest to where you are. Each leads to a Launchworks guide or tool built for it.
I will build it from nothing
Choose the type of business that fits your capital, time and risk, then narrow to a shortlist and test it before you commit.
Choose a direction →BuyI want a business that already trades
The six-stage buyer’s guide, from finding a business to the changeover checklist. The Fair Price Evaluator sits in stage two.
Read the guide →FranchiseI want a proven system and a brand
What the disclosure document should tell you, what the numbers need to show, and what the agreement commits you to.
Read the guide →Not sure yetI want help working out which fits me
A guided conversation that works from your skills, capital and the life you want. Franchise and property are among the eight directions it considers.
Find your direction →Further reading
- The Franchise Trade-Off Nobody Puts in the Brochure
- Your Next Acquisition Target Is an Owner Who Hasn’t Planned to Sell
- The Franchise Disclosure Document: What Franchisees Must Know
- Restraint of Trade: What to Check Before You Start
- Documents to Request from the Seller
Frequently asked questions
Is it better to start a business, buy one or buy a franchise?
None of the three is safer. Starting means you carry the idea risk and build customers from nothing. Buying removes the idea risk and adds a purchase price and the work of verifying the seller’s numbers. A franchise reduces the model risk and adds royalties, standard operating rules and limited control. The right route depends on your capital, how soon you need income and how much control you want.
Which is cheapest: starting, buying or franchising?
It depends on the type of business. A service business is usually the cheapest to start. Buying costs the price plus working capital after transfer and the fees of an attorney and an accountant. A franchise costs the fee plus fit-out, equipment, stock and working capital, and the fee is often the smallest part. Compare total cash required, not the headline price.
Which route gets me to income fastest?
Buying an existing business, because it is already trading and has customers on day one. A franchise usually takes months, because fit-out and opening come first. Starting from nothing is slowest, although a service business that can invoice within weeks is the exception. Speed of income is not the same as safety, and buying quickly is how buyers skip the verification that protects them.
What are the ongoing costs of a franchise?
A royalty, typically 5 to 12% of gross turnover, paid monthly whether or not the unit is profitable, and an advertising levy, typically 1 to 4% of turnover. On top of those come rent, staff and any supplies you must buy from the franchisor or approved suppliers. The unit needs enough margin left after all of these to pay you, so run the numbers before you sign.
What can go wrong when buying an existing business?
You take on whatever the previous owner leaves behind: employee liabilities, a customer base loyal to the seller rather than the business, and deferred maintenance the accounts will not show. The protection comes from verifying the numbers against records the seller does not control and from a purchase agreement that carries proper warranties. Use an attorney and an accountant.
Do I need experience in the industry to buy a business or a franchise?
Not always, but operating knowledge lowers the risk. A franchise usually comes with training, which helps. Buying a business you cannot run yourself moves the risk to whoever does run it. Either way, work out honestly what a normal week in the business involves and whether you can do it, or pay someone who can.
Can I combine routes?
Yes. Common combinations are buying an underperforming business where your skills fix the gap, buying an existing franchise unit from a current franchisee, and starting with a small service business to build cash before moving into a stock-heavy or premises-based one. Each combination carries the checks of both routes it borrows from.
How do I decide if I am not sure about any of them?
Start with what you can already sell, how much capital you can commit and how long you can go without income. Then compare the three routes on those terms. If you still cannot choose, a guided discovery conversation narrows the field to two to four directions, each with an honest read on capital, time to revenue and risk.