Myths and misconceptions abound when it comes to franchising business opportunities. Here are seven of the most common ones that every prospective investor should know about.
1. All chain restaurants are franchises
When people see a chain restaurant, they tend to assume it is a franchised unit. However, there are two business models that these chains commonly use. The first involves selling franchises, and the other involves hiring individual store managers to run corporate-owned locations.
2. Buying a franchise means guaranteed success
Although your odds of success are statistically higher with a franchised business, there are no guarantees. Even with a proven business concept, no business venture is without risks. However, studies show that the most common reason a franchise fails is because it did not follow the system.
3. It’s wasteful to invest in a franchise: just open your own business
All franchises have an initial fee that must be paid to open a location. Some people view this as a waste of money. However, studies show that nearly 95 percent of franchised businesses remain open for at least five years, and 94 percent of franchise-business owners consider themselves successful. The money you give the franchisor lets you in on a proven business model that will make your business much more likely to succeed.
4. You need to be wealthy to invest in a franchise
Although it can cost tens of thousands of US dollars – or even hundreds of thousands – you do not necessarily need to have that much in your bank account. There are multiple ways you can finance a franchise. Examples include personal loans, self-directed investments, small-business administration loans, and home equity loans.
5. Running a franchise business is easy
Although a franchisor will provide the franchisee with training and direction, the day-to-day operation of the store is your responsibility as the owner. There is no such thing as an easy business opportunity. Even with a proven business plan, to be successful you are still going to have trials along the way.
6. Opening a franchise business is cheaper
Some people assume that opening a franchised business will be cheaper than opening up a traditional business since they will save on marketing costs. Unfortunately, even with a very well-known franchise, you will still need to allocate funds for marketing. Additionally, royalties and fees can frequently offset any savings.
7. Higher initial fees mean better odds of success
The old saying "The more money you invest, the more money you make" is definitely not true when it comes to franchises. Just because the initial fee is sky high does not mean that you will have better odds of success. As mentioned, all business ventures involve risk, and there is never a guarantee that you will be successful, no matter what the franchisor tells you.
(Source: Asia Business Investor)