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Fact and Fiction with Franchise Ownership

Written by: Rick Bisio

Article Overview: This article discusses some of the facts and misperceptions in regard to franchising. It covers topics such as safety, support, territories, system, time commitments, ...

Fact and Fiction with Franchise Ownership

Gathering great franchise information and choosing a proven franchise concept is perhaps the best route to successful business ownership. There are many advantages to buying a proven business but many people are surprised to find out that buying a franchise does not ensure success. This is a fairly frequent misperception. This article studies some of the facts - and misperceptions.

Buying a Franchise is Safer than Starting a Business from Scratch. Almost every potential franchisee I talk with has heard this. And it is factual. The whole point of a franchise is that you limit your risk by buying a system that is already established. The instruments for success already are in place and there’s no need to spend years reinventing the wheel with product, pricing, marketing, and so on.

But don’t make the mistake of thinking that “franchising is safer” means “franchising is safe.” There are no guarantees. As we state in the franchise book - The Educated Franchisee - ‘Risk is not the same for everyone’. The location of your business, the time you have to devote, your management skills, and changes in the marketplace will affect your business.

Franchising gives you the opportunity to work for yourself, but not by yourself. A good franchisor will provide a proven business model that has worked for many franchisees. They will teach you how to be competent working within that model. Additionally, a respectable franchisor will offer on-going training and support.

In many franchises, especially if territories don’t overlap and franchisees don’t compete with one another, your fellow franchisees will constitute another wonderful resource, assisting you get trained in your particular franchise.

So you will work for yourself, but not by yourself. But don’t interpret this to mean that you call the shots and the franchisor is there to help you no matter what. The franchisor has rules and procedures that are designed to protect you and your fellow franchisees. And remember that the only business model the franchisor knows how to support you on is the model you purchased. If you depart from that model and things aren’t working, the franchisor will tell you to get back to the model. It’s advantageous for the system, and honestly, you can’t ask the franchisor to know how to assist you be prosperous in an altered model. One of the most crucial parts of your franchise education is to understand this: You must know how to lead while following. Lead your employees and your business but follow the system. Anything other than this will defeat the purpose of buying a franchise.

Owning your own business means making money while working the hours that are best for you.
How many times have I heard “flexible hours” cited as someone’s reason for wanting to buy a franchise. That’s fine - as long as you realize that’s a long-term goal for most franchises (or any other business, or a new job, for that matter). Having a business involves hard work. The long vacations and extra time with family may come in time, but new franchisees should expect to put in a lot of overtime, at least for a few years.

And not only will you not make money right away, you’ll need to invest money. You will need to pay an initial franchise fee, and, contingent on the business, you may have to sign a lease, pay for signs, inventory, marketing, salaries, and royalties, all before you’re making any money. It may require several months to several years for a franchise to begin making a profit.
Before you invest in a franchise, look hard at yourself. If you have some tolerance for risk; are willing to follow a system and work hard; and have sufficient capital to carry you until you make a profit, franchising may be the vehicle that assists you reach your goals. Just be smart and realize that, unfortunately, there is no magic bullet.

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Article Tags: article studies, best route, business model, business ownership, buying a franchise, fellow, franchise concept, franchise information, franchisee, franchisees, franchises, franchisor, guarantees, management skills, misperceptions, mistake, onl, scratch, successful business, wheel



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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