10 Common Franchise Misconceptions
1. All franchises are food brands
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Misconception: Franchises are all restaurants and coffee shops.
Reality: While it’s true that many food-based franchises exist, the franchise horizon has widened drastically over the past few years. Franchising is now a rich mix of opportunities spanning hundreds of industries – from landscaping and home services to fitness, health and wellness, education, senior care to B2B services and everything in-between. It also has varied formats from brick-and-mortar locations to mobile, online and home-based. There’s something for everyone.
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2. I will have full control over my business
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Misconception: Franchisees make all decisions like an independent business owner.
Reality: Franchises function on consistency — so although you make the important day-to-day decisions, you must follow brand standards, pricing structures, and approved suppliers exactly according to the brand guidelines. Flexibility is limited to protect the brand.
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3. The franchisor runs it, and I won’t have control over my business
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Misconception: The franchisor handles the hard parts like marketing, hiring, and operations.
Reality: The Franchisor is your partner, not your boss. Their role is to provide systems, training and support, but as the business owner and franchisee, important things like day-to-day operations, staff management, and local marketing are your responsibility.
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4. I don’t have to run the day-to-day business
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Misconception: I can just hire a manager and show up from time to time.
Reality: Some franchises allow for semi-absentee management once a solid foundation has been established, but most require hands-on franchisee leadership. The franchisor partners with you and your passion for the brand, not with a manager that they don’t know. Your full-time presence and their communication directly with you can mean the success of your business. Whether you’re looking for hands-on or semi-absentee, be clear that the requirements align with your expectations before you sign with the brand.
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5. Getting into franchising is expensive
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Misconception: You need hundreds of thousands of dollars or even millions to buy a franchise.
Reality: While there certainly are franchises in the $1million+ range that generally require high levels of money and management experience, there are so many entry points that it isn’t hard to find something to fit your budget. Many mobile, home-based and online businesses, and even some fixed location business can be found for under $50,000 or $75,000 – some even for under $25,000.
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6. The Franchisor has a pre-prepared contract, so I don’t need to do any research
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Misconception: The franchisor has done all the work so I can just sign.
Reality: The Franchisor prepares the contract so that all franchisees are consistent in their agreements, but you must still do your due diligence. Speak to existing franchisees to get their feedback on the brand, training, support, etc., look for past claims against the franchisor, high franchisee turnover, or other red flags. Check the investment and expected ROI numbers that they provide. Do they make sense? Finally, be sure to go over the details of the contract with your legal counsel to be sure that you understand everything, and that it’s the right fit for you.
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7. The franchise fee is the same as the investment level
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Misconception: Once you pay the franchise fee, you’re done with major expenses.
Reality: The franchise fee typically covers training and rights to use the brand, but not build out costs, equipment, working capital, or ongoing royalties and marketing fees. Make sure that your due diligence includes all these expenses.
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8. Monthly royalties are expensive
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Misconception: Royalty fees are a money-grab by the franchisor.
Reality: Royalties fund the Franchisor’s ongoing support such as training, national marketing, operational support and product development. Don’t just look at how much the royalty fee is — look at what you get for it. A higher royalty can be worthwhile if the franchisor provides the resources that drive your revenue. As an independent business, you would pay for all of this yourself and still not have the safety net of a proven business model behind you, so consider it an investment in your success.
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9. Buying a franchise means guaranteed success
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Misconception: Franchising is a sure thing because the brand is already proven.
Reality: The franchise offers a proven model, but success still depends on your effort and management skills, market conditions, a good location and your willingness to follow the running rules set out by the franchise. While being part of a solid franchise can greatly increase your chances of success, missing the mark in these factors can still lead to failure.
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10. All Franchises are the same
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Misconception: “You’ve seen one franchise, you’ve seen them all.”
Reality: Each franchise is unique. They will vary in costs, royalties, ROI, support levels and training among other things. Even two franchises in the same industry that appear similar can be vastly different, so you must do your research. Remember, too, that what each franchisor looks for in a franchisee can also vary a great deal, and for many brands the perfect fit between you and the brand is the most important factor.
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