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Five franchising myths

Written by Nigel Toplis on Thursday, 01 July 2021. Posted in Insight

Although successful businessman Nigel Toplis believes wholeheartedly in the power of franchising, he does admit there are a number of ‘myths’ which need to be shown the door.

Five franchising myths

Although successful businessman Nigel Toplis believes wholeheartedly in the power of franchising, he does admit there are a number of ‘myths’ which need to be shown the door.

Like most new business ventures, the path to becoming a successful franchise owner requires plenty of common sense, hard work, structure and focus. But there are also a handful of myths which need to be ‘put to bed’ too. In July’s column for Elite Franchise, I outline what these myths are:

1: Franchising is a magic wand for turning bad business concepts into good ones

Many years ago, I remember attending a gathering of business people and one of the guest speakers was lamenting on how one of his ventures was not performing very well. So he said he would sort this problem out by turning this particular business into a franchise. He assumed that would solve everything.

This just goes to show that even the most successful of business people do not fully understand the world of franchising. You won’t turn a bad idea into a good one by making it a franchise. Franchising remains one of the best ways to distribute products and services through an economy. However, it won’t turn a sow’s ear into a silk purse by simply converting it into a franchise. If the business is ‘crap’ then turning it into a franchise will simply make it ‘a crappy franchise’! Excuse my language, please.

2: You can be a successful franchisee by operating outside of the system

All franchisors have made errors in recruitment, at some point – myself included. Occasionally, we’ve allowed people who are patently just not suitable for self-employment to enter our domain. Among a franchisor’s duties are the following: They provide new franchisees with business and procurement advice, marketing tools, sales training and ongoing support. They assist new business partners by presenting them with a proven business system, trademarks and use of the brand.

In return, the franchisee must contribute a strong work ethic, ambition, plus a willingness to work with the franchisor. They should also bring with them a number of complementary skills. Good franchising is a marriage between two parties with different skill sets but with a common goal. If the franchisee does not want to be a spouse, then success for both parties will be difficult.

3: Hard work is not necessary if you have a good business concept

A few years ago, we were anticipating taking over a company that was struggling. I had some experience of the marketplace, through previous associations, and while their business had suffered badly over the previous couple of years, we felt we could help to turn it around by providing strong leadership and hard work.

We reached an agreement to purchase the company from existing shareholders who simply wanted out. However, we then came face-to-face with the incumbent managing director. This person had been in charge of the business throughout the period of its demise.

We made several suggestions about how we might turn the business around and what was required from him. We explained how we would support him and I’ll never forget his reply. He said: “Nigel, I haven’t worked hard for five years and I’m not going to start now.” The footnote to all of this was that we didn’t buy the business and he was eventually fired.

I’ve had the pleasure of working with more than 600 franchisees, over 27 years, and it’s not surprising to discover that those who are the most successful remain in the business for longest. Those who enjoy a consistently high financial return are also those who work hardest and follow the system. They possess drive, ambition and are happy to work with the franchisor.

4: Buying into a franchise is like buying a job

It certainly isn’t! I recall sitting down with a franchisee and discussing why his business was not performing at the level we all expected. He was in a good geographical area, the demographics were positive, and there was limited local competition. There were so many pointers in his favour.

The franchisee did his analysis and suggested it was the fault of the franchisor!

  • The phone never rang.
  • Footfall was negligible.
  • Few people attended his unit.

I remember telling him he should undertake a number of activities to try and kick start interest in his business. These included knocking on doors and explaining what he did; phoning people up; business networking; plus plenty of email activity. I told him he needed to increase his marketing activity. To which his stark response was: “I didn’t expect when I bought this job that I would have to go out and get business.” So I replied “Y-C-D-B-S-O-Y-A (You Can't Do Business Sitting On Your Ass).”

Franchising has an impressive success rate, with over 90% of new businesses still trading after two years. This compares favourably with independent start-ups, where 80% will go out of business during the same period. Yet, that’s not to say franchising is an easy road to riches.

5: Franchising guarantees success

To be successful you need to:

  • Choose the right franchise: One in which your funds match your skills and interests.
  • Select the right franchisor:  Meet with them, examine their history and challenge their support structure.
  • Meet existing franchisees: Ask them about franchisor support and understand the level of financial return you are likely to experience.
  • Prepare a detailed ‘business plan’ which examines the business proposition, pitfalls and rewards.
  • Find expert advice: Ask a specialist franchise lawyer about the contract agreement and seek out an accountant to assist you with the business plan.
  • Arrange funding: Banks will provide 70% but do not underfund the business.

Franchising is a hugely successful concept that enables franchisees to be their own boss. It allows them to create a satisfying work/life balance, while seeking financial security. Rewards can be significant but building any business – franchise or not – requires determination, hard work, ambition and dedication.

About the Author

Nigel Toplis

Nigel Toplis

About Nigel Toplis: Is managing director of four franchise businesses: Recognition Express (badges, signs and promotional gifts); ComputerXplorers (provides ICT educational classes for three-to-13 year olds); Techclean (a leading provider of system hygiene services to businesses in the UK); and Kall Kwik (a licenced operation and premier business print and design company in the UK). Nigel is a past chairman of the BFA, has written three books on franchising and, in 2007, became a Fellow of Lancaster University.

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