Navigating the terrain of choosing a franchise vs license when starting your own business is both complex and confusing. Sometimes it’s hard to tell which one will serve us the best. Where do we start?
Let’s clarify the differences between the two. Fortunately, we can sum them up with just one word:
That’s right. When you buy into a franchise, you are becoming part of their brand, their image. Most companies start from here—and every marketing or product decision flows from that single choice.
What does that mean for you, the franchisee?
It means you’ll have to conduct business according to the franchise’s rules and regulations. You will have some say in how you personally run your business, but their branding will make most decisions for you.
- Employees and inventory
- New construction and lease holding improvements
- Advertising and marketing
Plus, you’ll be paying royalty fees—as a percentage of your gross sales.
Let’s break these differences down.
Franchise vs. License: Territories
Each business has its own policy on territory restrictions, depending on its business model and marketing goals. It is up to the franchise company itself to determine what level of exposure and saturation they want their locations to have.
So, while you want to open a restaurant in the lower east side of Austin, Texas, for example, the chain may decide against that location. Instead, they want you to open it in Houston or San Antonio.
With a business license, however, you are generally free to open your company wherever you like, with few restrictions. Licensees usually aren’t affiliated with a parent company’s brand, so once you obtain your license, you are free to open and operate almost anywhere you like!
Franchise vs. License: Royalty Fees
What kind of royalty fees do you generally find in a franchising agreement?
Anywhere from 4-6% of your gross sales, though fees can be as high as 50% in some cases.
Franchise royalty fees also vary in frequency. You may be required to pay weekly, monthly, or quarterly fees. Plus, stringent auditing and bookkeeping procedures are usually required—which cut into your time and money.
However, with a license to the ECS Business Model, customers pay only a small monthly fee—not a percentage. So no matter how much you make, you’ll never pay more than the month before.
Franchise vs. License: Employees and Inventory
To restate our initial point about branding: franchises have definite, clear-cut marketing and business ideas about almost everything—including employees, employee training, what inventory you keep, and how much of it.
Plus, they require owners to train and monitor employees—according to their guidelines. They may even force owners to hire certain employees.
What about licenses?
Licenses generally don’t force business owners to purchase and hold certain amounts of inventory—again, because licensees aren’t affiliated with the licensor’s brand.
Once you purchase a license, you are usually allowed to run their business without interference.
Franchise vs. License: New construction and lease holding improvements
Franchisees are often beholden to franchisors in terms of construction and “lease holding improvements”—which refer to installations like doors, shelves, cabinets, and more.
Again, because a franchise has a specific brand to adhere to, they may require each store to look and feel the exact same. Not only does it mean more interference with how you run your business—it means you have to cover the costs, too!
The ECS Solution
With an ECS Business Model License for utility bill auditing, you are free to run your business anyway you like. Plus, you have almost none of the overhead costs of running a franchise.
With an ECS license, you’ll have:
- Freedom from territory restrictions
- Freedom from leasehold requirements
- Freedom from royalty fees as a percentage of gross sales
- Freedom from inventory requirements
If you choose to, you can operate simply from an office—or at home!— with or without employees.
Learn more about starting your own utility bill auditing company using the ECS Business Model. There are literally millions of potential clients, all over the United States.
Watch this exclusive video to learn more about your earning potential with the ECS Business Model.