Get All Access for $5/mo
The Wealthy Franchisee

These Are the Real Risks of Owning a Business Like any other type of small business, a franchise can be a minefield of psychological challenges. It is important to resist associating your business performance with your self-worth.

By Scott Greenberg

Key Takeaways

  • Running a franchise is an emotional experience with great highs and lows.
  • Wealthy franchisees aren't immune to the mental challenges of running a business—they've just learned to navigate through them.
  • You're the X-factor of your business. You are the most important variable that distinguishes your franchise location from all the others.

Opinions expressed by Entrepreneur contributors are their own.

This is part 6 / 6 of The Wealthy Franchisee: Section 1: Getting Wealthy Through Franchising series.

I am a speaker who helps franchisees think, lead and serve at a higher level. Part of my due diligence before giving talks at franchises is to survey the brand's franchisees. I collect their responses anonymously so they can answer freely. Here are some actual comments from a variety of brands that reflect the answers I typically get to this question: "What has been your emotional experience of running this franchise?"

  • "The feeling is one that the whole enterprise is held together by 'string' and it requires an enormous effort by the user to hold together. Mentally, it is tiring."
  • "Excited, anxious, nervous, and wondering if I will bankrupt my family before the business turns the corner of profitability."
  • "Where do I begin? Way too much mental stress between managing staff and financial issues. Dealing with people, both members and employees, is a HUGE drain physically and emotionally. We expected if we worked hard, success was imminent. We are working our heads off and really barely making it."
  • "I was told this business would cost me about $500,000 to get to breakeven. It was nearly three times that amount. For quite some time, the worry about making the next payroll was oppressive."
  • "Given our financial situation going into it, it has been much more challenging and stressful than I anticipated. The work combined with the financial stress has been very difficult to deal with at times."

I also get responses from people who express excitement and gratitude. But everyone is feeling something. Deeply. If there's anything I've learned from working with franchisees and owning one myself, it's that running a franchise is an emotional experience. And these emotions directly impact the way business is handled.

Related: Explore great opportunities on the Franchise 500

I was an Edible Arrangements franchisee for ten years. When Edible Arrangements International started talking about running its first national television campaign, one of my fellow franchisees objected. That made no sense to me. We were still a new company, and most people had never even seen a floral arrangement made with fruit. We desperately needed more brand awareness, so I asked him why he was against it.

"There's already too many Edible Arrangements franchises in Southern California," he responded. "If we go on TV, it'll make even more people want to open franchises out here, and there'll be more competition."

His idea for marketing our brand was to keep it a secret. This was a highly intelligent guy with a graduate degree who owned multiple locations. His perspective wasn't based on data. It was based on fear.

I tried for several years to start a local marketing cooperative among franchisees in Southern California. We were the densest territory in the company, so logic dictated that we pool our marketing dollars. The company already had some functioning marketing co-ops, and they were working well. But too many people were scared to commit the money. One highly educated but struggling franchisee told me he couldn't afford to advertise. He didn't see marketing as an investment, just an expense. It didn't matter that he was smart. He was too afraid.

The Real Risks of Owning a Business

Statistics about small-business failure abound. Some sources will tell you that half of all businesses fail in the first year, while others say the failure rate is closer to 90 percent. Some stats cite the rate of SBA loan defaults: From 2006 to 2015, about 17 percent of SBA-backed loans defaulted. It's really hard to nail down the actual batting average of rookie small businesses, but all you really have to do is drive down the street and watch the changing storefronts to draw the conclusion that starting a new business is tough. That makes it an intensely emotional experience.

Related: Discover 5 Top Retail Franchise Opportunities to Invest In

A franchise is a minefield of psychological dangers. It's so tempting to take your enterprise personally and associate your business performance with your self-worth. In one 2015 joint study by researchers at University of California, San Francisco, University of California, Berkeley, and Stanford University, 72 percent of entrepreneurs surveyed reported experiencing mental health concerns. In another 2019 study by the Canadian Mental Health Association, 62 percent of entrepreneurs reported feeling depressed at least once a week. It's not clear if the stress of owning a business causes depression, or if entrepreneurship attracts those who are predisposed to depression.

I experienced a wide range of emotions as a franchisee. On the high end was exhilaration, and on the low end was total despair. There were stressful times I felt completely trapped, hating the business but unable to escape it. I remember days when my expenses were rising so quickly that it seemed like the walls were crashing in around me.

It would be helpful if more franchisees acknowledged these feelings. But emotion has always been taboo in business. Vulnerability is seen as a sign of weakness. There's no crying in baseball, and there's none in business, either. If anything, we practice the opposite, what psychologists call impression management. This is the process by which a person tries to influence other people's perceptions of their image. Think of someone wearing expensive clothes or driving a flashy car to project an air of success. Impression management is everything we do to make others think we're stronger, saner, and less human than we are.

There's no doubt people are attracted to perceived success. But the price we pay for that external image is internal neglect, and eventually, it catches up to us.

Wealthy franchisees aren't immune to the emotional challenges of running a business—they've just learned to navigate through them. That's their advantage. Fortunately, franchises are a little less mysterious than other new businesses. If a company is franchising, chances are they've had some success and know how to replicate it. They've done the market research and product development and negotiated with vendors. They've tried and erred and learned.

Related: Here Are 4 Big Franchising Trends You Should Know Abou

A franchised business comes with a lot of data, and that makes it a safer bet. But what the franchisor can't tell you is how you will run the business, just as an auto dealership doesn't know how you will drive and maintain their car. You're the X-factor. You are the most important variable that distinguishes your franchise location from all the others. So maybe you should take your business performance personally. Maybe you're the source of your problems—or your prosperity. Whatever is happening in your business is on you. Don't let the statistics about failing businesses scare you. Those businesses weren't run by you. If you invest in a proven concept and operate it intelligently, there's every reason to believe you're going to thrive. But you're going to have to manage your head as well as you manage your operation.

Scott Greenberg

Entrepreneur Leadership Network® VIP

Franchise Expert, Speaker & Author

Scott Greenberg designs game-changing steps to grow businesses, build high-performing teams and create unforgettable customer experiences. For ten years Scott was a multi-unit, award-winning franchise owner with Edible Arrangements. His operation won international recognition: "Best Customer Service" and "Manager of the Year," out of more than 1000 locations worldwide. Today he's a sought-after international speaker, consultant and franchise coach, with clients that include McDonalds, Great Clips, GNC, RE/MAX, Smoothie King, Global Franchise Group and countless other companies in all 50 U.S. states and throughout the world. He's also a VIP Contributing Writer for Entrepreneur.com. Going beyond numbers and profits, Scott delves into the human-side of business to help organizations boost performance and make a memorable impact on the lives of customers and employees. Scott is the bestselling author of The Wealthy Franchisee (2020), as well as his newest book Stop the Shift Show (2024).

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Franchise

Kick-Start Your Small Business With These Cost Effective Strategies

Starting a small business is an exciting adventure, brimming with both opportunities and challenges. A key to success is effectively managing costs from the outset.

Side Hustle

'Hustling Every Day': These Friends Started a Side Hustle With $2,500 Each — It 'Snowballed' to Over $500,000 and Became a Multimillion-Dollar Brand

Paris Emily Nicholson and Saskia Teje Jenkins had a 2020 brainstorm session that led to a lucrative business.

Leadership

7 Telltale Signs of a Weak Leader

Whether a bully or a people pleaser who can't tell hard truths, poor leadership takes many forms.

Business News

'I'm Shocked': Costco Customers Are Freaking Out About a Change to a Beloved Bakery Item

Costco customers are feeling burnt by a not-so-sweet switcheroo in the bakery department.

Living

70% of Small Business Owners Experience Monthly Burnout. Follow These 3 Rules to Avoid the Same Fate.

Here are three guidelines to help entrepreneurs achieve balance, growth and success in both their professional and personal endeavors.