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Common Misconceptions about Franchises

Common Misconceptions about Franchises


Although franchising has become rather popular in recent years, it's not well-understood by most of the population. Neither employee nor business owner, a franchisee operates somewhere in the middle of these two ends of the labor spectrum. If you ask somebody what it must be like to franchise, they'll probably have trouble describing the experience if they haven't done it before. Franchises exist nearly everywhere you go, but the experience of running one is foreign to a lot of people.

 

If you're considering opening up your own franchise, it doesn't help to operate on a lot of inaccurate or outdated information! We'll be completely frank with you: operating a franchise isn't exactly like being a business owner, but it offers a lot more freedom than being an employee. For some people, this is perfect. You get all the stability and brand-name recognition of your parent company, but you're still given the freedom to (mostly) run things the way you want. If you're considering opening up your own franchise, it helps quite a bit to know exactly what you're getting into.

These following points are commonly believed to be a part of owning a franchise, but the reality is quite a bit different.

1) The requirements are extremely strict

Not quite! At least, this is true for most companies. A few do require you to have a large amount in liquid assets (>500,000 dollars), but this generally only applies to restaurant-type franchises. If you're opening up, say, a car repair shop, the expected cost is much lower - around 30-40,000 dollars. This isn't a trivial sum of money, but it's much more attainable by the average person. A few companies will cover your initial startup costs entirely - Chik-Fil-A is famous for this, and it's a large part of why so many people want to franchise with them.

Similar to the belief that you need tons of money to open a franchise is that you need a lot of prior experience in running a company. This certainly helps a lot, but it's not a requirement for most companies. A few discerning companies might require some prior experience in a relevant industry, but most franchisors are welcoming of people from all walks of life.

2) They are self-perpetuating

This is an especially dangerous myth and one that is particularly widespread. The ubiquitousness of certain brands (especially in fast food) has led people to believe that the mere possession of that brand's licensing and imagery guarantees a franchisee success. That is not true in any way - we can attest to this from experience. A poorly-run franchise will experience some initial success because of brand-name recognition, but sales will quickly level off when people realize that the quality of customer support and cleanliness is not up to standard. If you allow yourself to believe that franchises are self-perpetuating, you will find yourself closing your doors real soon.

3) They are largely run the same way

While there are operational similarities within a given industry, most of the variation that you experience results from the parent company that you are franchising from. Burger King and McDonald's are considered to be very close to each other in terms of what they offer, but the manner in which they are run is quite different. Don't just look at what product and/or service that's offered - also take into consideration internal operating procedures. Your experience with a company will largely boil down to the way in which they treat their franchisees; speaking to other people who have dealt with the same company is a great way to get a feel for what you are getting yourself into.

4) More money spent is more money earned

To some extent, it is true that you have to spend money to make money. If you don't invest in your franchise's success, then you won't get a whole lot in return (see point two). With that said, there is little correlation between money spent and money earned. The way you present yourself, use your given resources, and organize your team will play a much bigger role in your success as an owner. Shovelling money into a business is what you do when you are masking a deeper underlying problem. There are times when you'll have to fork over money to keep things running smoothly, but it should not ever be a regular thing.

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The concept of business coaching, as it is widely known today, was pioneered in 1993 by founder of ActionCOACH Brad Sugars. More than two decades later, the company that started it all is still on top. In fact, no franchise in the “business coaching” category is 10% of our size in total revenues.

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