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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.

Know Before you Go – Non-Compete Provisions in Franchise Agreements

In general, non-compete provisions state that the franchisee will not, during the term of the franchise agreement and for a reasonable period thereafter (typically two or three years), own or be involved in any “competitive business.” What constitutes a “competitive business” will vary from franchise system to franchise system, but most franchisees can generally expect to be prohibited from taking part in any business that offers goods/services that are either identical to or competitive with the goods/services offered under the franchise system. Non-compete provisions must be limited in geographic scope, and generally cover a set radius (usually somewhere around 5 to 25 miles) around the former franchised outlet, and possibly also the outlets of other existing franchisees.

Choosing a Service Franchise or a Product Franchise

Most of the franchises offering Product oriented goods have very stringent rules. Since their brand is associated with a tangible good they must guarantee the desired quality from the consumer’s expectation. Franchisees must purchase the goods from a designated supplier and must keep items in their inventory as suggested by the franchisor. This can be company regulated policies or simply to help the franchisor launch some of their new products.

2015 Top 5 Restaurant Franchises

Without a doubt, the industry most tied to franchising in Americans' minds is food. Some of the most popular restaurants out there, including McDonalds, Subway, Chik-Fil-A, and many more, can credit theirmeteoric growth to the skill of theirfranchisees.