Busting Franchise Myths
Posted on October 22, 2010 by Lindsay Hall
Even in today’s troubled economy there are numerous ways to invest to secure your family’s future. One way this is being done is by buying a franchise business. A franchise business can be a great way to see a return on money invested but it’s never a sure thing. There are many aspects to a franchise company that can be misleading to a potential franchisee. Research data can be skewed, risks to the franchisee can be downplayed and potential profit figures may be inflated to make buying a franchise seem like a great deal. Oftentimes, franchisors aren’t doing anything except furthering a potential franchisee’s ignorance of what is franchise fact and what is fiction. A potential franchisee is left to sort the myths from the truths on their own.
- Myth #1: The most expensive franchise businesses will bring the most profit!
Wrong! Oftentimes, it’s the complete opposite. The more cash you have to sink in the beginning, the longer it takes for you see a return on your franchise investment. Franchisors are free to set the prices for their initial franchise fee and are not indicative of a healthy franchise business model. You will need to do your own research on market conditions, location and the efficiency of the business model the franchise organization has in place.
- Myth #2: The bigger the franchise, the more likely you are to succeed!
Do not be fooled! While this myth may in fact be true in some instances, most of the time it is false. Buying into a large franchise chain has its advantages, such as larger scale advertising, sophisticated and tested business plans, more capital to support the brand and group discounts for business equipment that will be needed. However, the group discounts are often negated by higher royalty fees. Large franchise opportunities also offer little to no flexibility when it comes to setting store hours, how many employees you need to hire, products you must carry, suppliers you must use and pricing for your services.
- Myth #3: I will make lots of money, and it will be so easy!
This myth is really a two headed beast. You may make lots of money but the facts are that most franchisees do not get rich in franchising. It is also not an easy task. Buying a franchise may be slightly easier that starting a business from scratch but it’s still starting a business! You can expect to work long hours, 12-15 per business day and you can expect to wait a year or more to see any returns on your franchise investment. One way to ease the stress of the process is to get help. Experienced professional franchise lawyers and accountants can help you navigate the dangerous traps that many franchisees fall into, such as very one- sided franchise agreements with franchisors. Hiring a franchise lawyer can save time, stress and increase your chance of success.
There are many myths and half truths that people hear and tell in the franchising industry. As a potential franchisee you need to do a careful franchise evaluation. Getting educated, having a franchise lawyer at your service and having realistic expectations are a must to be successful.