The Truth on Franchising

Although franchising is widely known to offer aspiring, new business owners the best possible chance of success with the least amount of risk, there are some myths out there that can tend to alienate even the most die-hard entrepreneur. Below, I clear up some common franchise misconceptions that will breathe new life into your goal of owning a franchise business.

Owning A Franchise Guarantees Success. You need to get clear on the myth that by owning a franchise, you absolutely cannot fail. That’s a crock. There are numerous factors, both controllable and uncontrollable, that can determine the fate of your success. However, a huge statistic is in your corner: overall, the success rate of franchising is as high as 95%. Of independent start-ups, on the other hand, only about 2/3 are still in business after 2 years and, sadly, less than half survive 4 years, according to the Small Business Association. No guarantees here, but with a determined effort on your part, franchising is the obvious choice. 

Brand Name Means Everything. While you cannot minimize the importance of a highly recognizable brand name, it is only part of the equation. Brand is very significant with burger and automotive franchises. However, there are many franchise categories, some you may not even be aware of, where the brand clearly isn’t the main focus, but that doesn’t translate to a lack of success.  

Mr. Handyman, for example, a homeowners and commercial maintenance and repair franchise, has over 300 franchise units across the United States and Canada. The Home Improvement market is huge and continues to grow, with Americans spending more money on remodeling, renovating and decorating than ever before. The brand isn’t a household name like McDonald’s, but this home based franchise is a highly successful one, with a much smaller investment required. 

There are hundreds of consulting type franchises that most people have never heard of by name. Many are extremely successful, with much less overhead, than fast food or automotive franchises. 

A significant investment is involved, so the only one getting rich is the franchisor. What a joke. Franchisors absolutely need profitable, successful franchisees to flourish. The fact that ongoing royalties are paid by franchisees on a regular basis indicates that a fair an equitable relationship exists between the two parties, and that the franchise is profitable. If they weren’t, who would pay these fees? A poor performing franchisee will not last very long. The franchising business model is structured specifically so that both the franchisor and the franchisee succeed.

Bigger Is Always Better. Not true, especially in the franchising world. Think about it: would you rather invest every last dime you have into a fast food business, make a decent income, and deal with high turnover, high overhead, theft, worry about what is going on at your store with the brand new teenager that is working the Saturday night shift? Or, would you prefer a home-based service franchise that costs $50,000 (or less), allows for plenty of family and free time, and generates as good or even better income than the food business? Most potential franchisees are better suited, and would even prefer, a small franchise with limited, but highly skilled, employees.

Owning A Franchise Means You’re On Your Own. Nothing could be further from the truth. Yes, ultimately, whether a franchise succeeds or fails is the responsibility of the franchisee. However, a huge benefit of being a franchisee is that there is always a support staff, provided by the franchisor, ready to help you with any issue you may encounter regarding your business. Some offer 24-hour call centers. You are most definitely in business for yourself, but not by yourself. 

Because the general disposition of our society tends to be negative, positive aspects regarding anything, including franchising, can become distorted. I’ve focused on clearing up five of them here, although there are more, to be sure. Do your research and align yourself with an experienced franchise consultant who can provide you with the necessary facts so that you’re able to make an educated decision about a specific business opportunity.

Here is a Quick Checklist when dealing with a Franchisor

Checklist:

Questions to ask a Franchisor when researching a franchise opportunity:

1.       How long has the company been Franchising?

2.       How many franchise locations does the Franchisor have?

3.       Have any failed in the past?

4.       What was the cause of failure?

5.       What type of training and on-going support will I get?

6.       What is the duration of training?

7.       How long is the term of the franchise agreement?

8.       How much liquid capital do I need to invest?

9.       What type of finance options are available and is there any financing assistance?

 

Questions to ask yourself before buying a franchise:

1.       Can I afford the franchise?

2.       What are my goals, both short and long term?

3.       Am I ready to take on the responsibilities of running my own business?

4.       What industry sector interests me? And why?

5.       Would I be happy focusing on the business in the industry sector of interest for the next 5, 10, or 20 years? Will my family or spouse accept my choice of business and support me?

6.       Do I like dealing with people considering I will have to interact with customers, employees, and the franchisor?

 

About Franchising

Better Business Bureau Buying a Franchise: Insider’s Guide to Success. Planning Shop:

http://www.planningshop.com/products/bbbfranchisesample.pdf

Expert advice from a trusted source.How to choose, what to ask, truth about fees, red flags, how to be profitable, special online section

International Franchise Association

                        www.franchise.org

• Membership organization founded in 1960
• Comprises franchisors, franchisees, and suppliers
• Tracks state, federal and international business/franchise issues

Franchise arrangements are characterized by a contractual relationship between a franchiser (a manufacturer, wholesaler, or service organization) and franchisees (independent entrepreneurs who purchase the right to own and operate any number of units in the franchise systems). Typified by a unique product, service, business method, trade name, or patent, franchises have been prominent in many industries, including fast foods, video stores, health and fitness centers, hair salons, auto rentals, motels, and travel agencies. McDonald’s Corporation is a prominent example of a franchise retail organization, with franchises all over the world.

Canadian Franchise Association

Canadian Franchise Assocation
With almost 500 corporate members nation-wide, representing many of Canada’s best-known brands, the Canadian Franchise Association is the National Voice for Canadian Franchising and works with all levels of
government to ensure the development of industry-made solutions. CFA promotes ethical franchising and educates Canadians about franchising, specific franchise opportunities and proper due diligence. For more
information, visit www.cfa.ca.