8 Franchise Ownership Myths
Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
As a 25-year veteran of the franchise industry and a multi-brand franchisor, I've seen tremendous growth in the popularity of franchising. However, a number of misconceptions about franchise ownership still exist, and if you accept them at face value, there's a good chance you'll be robbing yourself of an opportunity that can be not only financially rewarding, but also personally satisfying. Before you make up your mind, it helps to know the facts. Here are eight franchise myths that will help you realistically evaluate whether buying a franchise is right for you:
Myth 1: I'll only be successful if I find the right business
Many of us define "right" as what we're already good at. But don't limit yourself. Define your transferable skills from the corporate world: delegation, management, marketing, etc. If you had them in one type of business, you can easily use them in another.
Myth 2: I can only be successful doing something I love
Believe it or not, businesses based on an owner's background have the highest failure rate. Your franchise business is a vehicle to the lifestyle you're seeking. If you limit your choices to what you're familiar with or good at, you're placing yourself at a major disadvantage by ignoring a huge number of possibilities that are outside your realm of past business experience.
Myth 3: I'll instantly know the right opportunity when I see it
Many people want to fall in love with their business at first sight. That's an emotional decision, not a career choice. You have to take the time to learn about the details and nuances of an opportunity to understand its potential. You simply can't do that when you make a determination based only on what you feel today.
Myth 4: I can't be in a business I know nothing about
Of course you can. It's natural to want to stay in your comfort zone and stick to areas you have experience in. But as a franchise owner, your job is running and growing your business, no matter what it is. Remember, you have transferable skills. That's your strength. You can hire people who know the details. Your road to success is buying into and learning the franchise system--which is already a positive working model--and then using your talents to make it grow.
Myth 5: there's no freedom in a franchise--corporate dictates everything
This is one of the most pervasive myths about franchise ownership. In actuality, there's tons of room for individuality. The franchisor "dictates" only one thing: the basic system--the framework, if you --that's already proven successful. Beyond that, you're in charge. You're managing your business. You decide who to hire and fire, how to market your location and how to promote it regionally. Keep in mind that the franchisor wants you to succeed, because if you don't, they don't. It's a win-win situation.
Myth 6: Franchises stifle creativity
Again, this is patently untrue. The only limitations you have are those that have already been proven to generate income. This might include signage, uniforms, formulas, protocol, and so on--the basics that allow you to represent the brand and your own location as professionally as possible. But it's completely up to you to think up new ideas and make suggestions to corporate. In fact, most franchise parent companies encourage suggestions, because it's where they get many of their best ideas. McDonald's corporate, for example, didn't come up with the inspiration to start selling breakfast. The concept of the Egg McMuffin was developed by a franchisee.
Myth 7: I can't afford a franchise
Sure you can, if you look at it for what it is: an investment in your future. Most franchises can be established for well under $100,000, and some can be started for as little as $12,000. Your only payments to the parent company are a one-time franchise fee and weekly or monthly royalties, which are usually determined on a case-by-case basis. Beyond that, your out-of-pocket expenses are the same as they'd be for any business--salaries, local advertising, etc. The difference is you have the support and training of the franchisor, which will help you ramp up to full speed far more quickly that you could on your own.
Myth 8: I'll have to quit my job to become a franchisee
Many franchise concepts are specifically designed for people who are working other jobs. In fact, a large percentage of franchise owners are passive rather than full-time investors.
Can franchises still fail? Sure they can. But the vast majority of the time this is due to the owner deviating from the system and cutting corners by using inferior materials or altering formulas. The key to making it as a franchisee is consistency. If you don't adhere to the groundwork--which, once again, is in place because it works--your chances of success will drop dramatically. You want to leave the habits from the corporate world where they are and bring along your marketable and transferable skills.
All told, there are more than 900,000 franchised business in the country, which account for over 11 million jobs nationwide. They produce $2.31 trillion (yes, trillion with a "t") in total economic output and represent $660.9 billion in private-sector salaries. Those figures are tough to argue with. Perhaps it's time to stake your claim.