Ever wondered if owning a franchise is as restrictive and risky as people say? Or maybe you’ve heard it’s truly rewarding and fairly effortless. Entering the world of franchising can be an exciting and lucrative venture. But it’s often clouded by misconceptions that can deter potential franchisees. Many aspiring business owners have preconceived notions about what it means to own a franchise. This can range from concerns about profitability to fears of losing creative freedom.
On the other end of the pendulum, a lack of knowledge can lead to a false sense of invincibility. Perhaps you’re considering a franchise for its established brand power or its support system that runs like a well-oiled machine. There’s no way you can’t succeed, right? Regardless of your current feelings, you may find it worthwhile to look beyond surface level assumptions when it comes to these myths. Afterall, there are few decisions bigger than choosing to buy a business.
So let’s explore some of the biggest misconceptions around owning and operating a franchise.
1. Limited Autonomy
You may have heard that owning a franchise means sacrificing autonomy and creativity. Sticking to the franchisor’s established business model and brand standards is usually essential. Franchisees may enjoy a proven system and brand recognition, which could help reduce risk and provide a solid foundation for success.
The good news is this means franchisees can focus their efforts on operational excellence and customer service. These are prime areas to unleash creativity and let their personal touch shine! Striking a balancing between brand guidelines and innovation can be very doable. Franchisees that figure this out may be able to create a thriving and dynamic business – one that reflects the brand’s strengths along with the franchisee’s own entrepreneurial spirit.
2. High Costs
There’s often a perception that buying a franchise requires a sizeable upfront investment. When you do the math, franchise fees, royalties, and other associated costs can add up. And lots of aspiring entrepreneurs believe this makes franchise ownership out of reach.
It’s true that buying a franchise requires you to have a plan on how you’re going to pay for it. But this perception doesn’t tell the whole story. The investment level range is vast. Some franchises are available at lower entry costs than you might expect.
Keep in mind, the initial investment provides access to what may be an established business model. This can include comprehensive training, ongoing support, or brand recognition — all of which may be more economical than having to start from scratch.
Moreover, potential franchise owners could have a number of financing options available. Many people aren’t aware of the various types of loans and incentives that can help make franchising more accessible. Before you dismiss the idea, research your funding options. You may be surprised at how this might make franchising a viable and attractive path.
3. Guaranteed Success
We can easily put this one to rest. If success were guaranteed, everyone would own a franchise. The idea of existing brand recognition, marketing support and other possible advantages of buying into a franchise are not enough on their own. Success will very likely still require hard work, dedication, and effective management. There are many pros to owning a franchise, but it’s not a guaranteed ticket to high performance.
Franchisees may often need to actively engage in their business. This might mean making day-to-day operational decisions or being there to provide excellent customer service. If there’s a team in place, perhaps it’s motivating and training employees. In many cases the franchisor provides the tools and framework. But in the end, a strong commitment and business acumen on the part of the franchisee can be crucial to success.
Once the business is up and running, many franchisees choose to hire a manager to handle the daily operations. This often allows them to focus on big picture growth and future planning. It can be a great strategy once, as an owner, you feel the business is sound and are confident in the leadership you’ve put in place.
Like any other business venture, the effort and planning typically play a key role in achieving and sustaining growth.
4. Risk-Free Investment
It’s been said that buying into a franchise seems like a safer investment than building a business from the ground up. In many cases, there might lot of truth to that statement. The reality is, there are still risks. Few businesses are immune to market fluctuations, competition, and changes in consumer preferences.
To mitigate this type of risk, franchisors may offer valuable tools. Market research, ongoing training, and strategic marketing might be a few examples. When a franchisor invests in these resources, it can help franchisees adapt to market shifts. Additionally, the collective strength of the franchise network can foster resilience and shared learning. Many franchisees find this extremely valuable.
By nature, the franchise model has the potential to reduce a lot of risks. But an active and involved franchisee may be able to better navigate challenges to achieve results.
5. Lack of Flexibility
Ever heard any of these misnomers? They go hand-in-hand with the “Lack of Autonomy” belief.
• “Owning a franchise means following a bunch of strict rules set by the people at corporate.”
• “The franchise model stops owners from trying out their own ideas.”
• “Franchise owners can’t make changes to fit local market conditions.”
Owning a franchise frequently means sticking to a set of established rules, but this doesn’t always equate to zero flexibility. Many franchisors recognize the importance of local customization. In fact, they often encourage franchisees to tailor their operations to meet the specific needs of their market. Maybe it’s applying local marketing strategies, adjusting offerings, or personalizing customer service. These are a few scenarios of how that might come to life.
Plenty of franchisors value the input of their franchisees and this often results in incorporating franchisee ideas and feedback to improve the overall business model.
So, while there are guidelines to follow, some come with more flexibility than others. Franchisees still generally have room to exercise their ingenuity, as it’s well-recognized that individual markets can vary widely. That means leveraging the strength of the brand and creating local relevance can be important.
6. Limited Profit Potential
Not surprisingly, profitability is commonly top of mind when considering starting a business. The potential for a strong bottom line is usually desirable, but you shouldn’t rule franchising out because of this. Don’t be fooled by the belief that the profit outlook is grim due to franchise fees and royalties.
Royalties and fees are all but unavoidable in the franchising world. But the perception that franchising offers limited profit potential is not always accurate. Don’t overlook the impact the franchising model can have on a business’s sales and profit. Remember that you may be buying into some advantages like:
• Potential for brand recognition with built-in customer loyalty
• Already-created training curriculum
• Supply chain management
• Operational efficiencies
None of these are guarantees but they are examples of perks that franchise owners may enjoy as part of a franchise system that could lead to reduced costs and improved margins. Countless franchises have achieved strong profits despite the fees. The fees are simply the cost of doing business. It’s also worth noting that there’s a variety of royalty structures — and many can be in favor of the franchisee.
Controlling costs, good inventory management, upselling and cross-selling are just a few tactics that can help maximize margins. The profit in a franchise has the potential to be substantial. Leveraging the franchisor’s resources and diligently managing the business may increase that likelihood. A collaborative relationship with the franchisor can lead to a win-win situation where both parties benefit from the business’s success.
7. Uniform Performance
Individual results may vary (for better or worse!). That’s essentially the disclaimer written into every franchise agreement. The success of a franchise unit can vary based on several factors — location, competition, and management just to name a few. It would be a mistake to assume that all franchise units perform similarly, regardless of location or market conditions.
Fortunately, this information is typically made available to you once you form a relationship with a prospective franchisor and have begun the investigation process. This industry is heavily regulated, and a high degree of transparency is required by law.
As mentioned, local market conditions may play a crucial role in determining performance. A franchise in a high-traffic, affluent area might perform differently than one in a less populated or economically challenged region.
Additionally, the level of local competition can influence a franchise’s success, as could the management skills and dedication of the franchisee. If franchisees can gain an understanding of their local market dynamics they may be able to effectively alter their approach and better meet community needs. Even with the support of the franchise model, each location’s performance can be quite different depending on their unique situation.
In closing, the moral of the story is new or aspiring franchise owners may find material value in questioning their (and others’) assumptions around franchise ownership. Careful research can help you understand what owning a franchise is really like. Take care to avoid overestimating or underestimating the power of the franchise model. Each franchise is different, and success usually depends on multiple variables like market research, good financial planning, and matching the franchise with your own goals and values.
To learn more about franchise ownership request a no-obligation consultation with a FranChoice Consultant!