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Debunking Franchise Myths

We all know the upside to franchising: proven franchise system, training and support, purchasing power, brand recognition, and lower risk of failure top the list. But before you utter those three little words, "it's all good," take a reality check. Consider this list of common myths surrounding franchising and get the true facts.

Myth

Success is guaranteed. 

Fact

Franchising does increase your chances for success over going it alone, but it's not a magic solution. Any venture involves risks; a proven system merely lowers those risks.

Myth

You can be your own boss. 

Fact

Yes, you will enjoy some perks as a business owner, but you still have to follow someone else's rules-the franchisor's. You may not have the power to make even the most basic decisions about hours of operation, pricing, suppliers, and marketing.

Myth

It's cheaper than starting from scratch.

Fact

The cost of starting a franchise is about the same as starting your own business when you consider the real estate, build-out, equipment, supplies, and advertising. You might get some price breaks from group purchasing, but royalty fees will offset any savings.

Myth

It's easy. 

Fact

Don't assume that once you make your investment it's not going to be as hard as a regular non-franchise business. With a franchise it's going to be an easier transition and a lower chance of failure, but there's no way around it-running a business is hard work.

Myth

Bigger is better. 

Fact

Bigger companies do offer some advantages like large-scale advertising, sophisticated systems, and more capital to support the brand. But smaller franchisers are often more flexible and responsive to franchisees.

Myth

A high-priced franchise will yield a bigger ROI. 

Fact

Often the opposite is true. The price of the franchise has little to do with profit potential. You need to take into account numerous factors such as market conditions, system efficiency, location, and your own knowledge of the industry.

Franchise Mergers and Acquisitions

There are several reasons for franchises to consider acquiring another franchise. It could give them the opportunity to add new products without the risk or cost of developing these offerings internally. It could help the buyer add new markets, geographically or demographically speaking, with an already strong existing brand. Acquiring a franchise supplier or distributor could build efficiency through vertical integration. Acquisitions can also help a franchise develop sufficient scale to compete with a larger rival more effectively.

The Last 50 Yards

The picture I see in my head is an Indy car race team that has spent an entire year building the absolutely finest car on the track. Engineers and mechanics, drivers and technicians, pit crew and support staff have all labored for months on end. Every aspect of the car is top-notch. Every bolt, wire and component is the finest available. It is a multi-million dollar technical marvel.