Franchising offers entrepreneurs a preferred pathway to launch their own business, supported by a recognised brand and a robust support system. A primary objective for franchise owners is not only to foster a thriving business but also to develop a long-term strategy focused on building a saleable enterprise, rather than solely on immediate profits. Having a comprehensive exit strategy in place is essential for maximising the franchise’s value, enhancing its future profit performance, and supporting its growth potential.
For those contemplating an entry into franchising, understanding its complex environment is vital. Clearing up prevalent misconceptions is crucial for prospects in order for them to successfully steer their way towards business ownership. Paul Edwards, Managing Director of GreenThumb, demystifies the five most common myths about franchising.
Industry experience is required to run a franchise
While some franchisors do prefer candidates with industry-specific experience and skills, having strong business acumen is often more crucial for effective management of a franchise. Many franchisors prioritise finding franchisees who possess the right personality traits and transferable skills that complement the franchise’s brand ethos. Franchisors typically provide extensive training and continuous support in key business aspects such as marketing, recruitment, and operational procedures. Franchising can offer a profitable and fulfilling business model, but it’s essential for prospects carry out thorough research and due diligence to ensure they choose a franchise that aligns with their budget, interests, and lifestyle. This will enhance the likelihood of success, irrespective of prior industry experience.
Owning a franchise isn’t the same as being a business owner
While franchisees must adhere to specific guidelines and systems to maintain brand consistency, this does not equate to a total loss of control. Franchise owners manage the daily operations of their franchise, similar to any other business owner, and make a variety of decisions concerning their business activities, such as staffing, local marketing initiatives, and management strategies. The structure set by the franchisor is designed to enhance, rather than inhibit, the franchisee’s entrepreneurial spirit.
Franchising is high risk
Contrary to common belief, franchising often presents lower risk than independent start-ups due to its proven business models and established support structures. By investing in a franchise, you benefit from more than just a recognised brand; you gain access to a well-established business model that has demonstrated proven success. Statistically, franchises show a remarkably low failure rate, consistently under 5% for the past two decades. This underscores the reliability and strength of franchised businesses, making them an attractive option for entrepreneurs aiming to reduce risk and maximise their chances of success. However, it remains crucial for potential franchisees to thoroughly investigate and evaluate the expected return on investment before making any commitments.
Franchising is not limited to well-known brands
Franchising spans a diverse array of business sizes, offering numerous opportunities across various sectors and industries. It influences many lives daily, not just through globally recognised brands but also through smaller, specialised franchise opportunities tailored to specific markets and interests. From lawn care and hospitality to retail and fitness, the franchise industry provides a wide spectrum of possibilities for aspiring business owners. This diversity enables individuals to choose a franchise that aligns with their passions, skills, and financial capacity, making franchising a versatile and accessible pathway to business ownership.
Franchising is expensive
This is a common misconception, as franchising actually encompasses a wide range of industries, each offering various brands and differing initial costs. While some franchises do require substantial capital, numerous low-cost opportunities also exist, often yielding substantial returns. Banks tend to be more favourable towards lending to franchisees because of the reduced risk associated with proven business models, easing financial challenges. Additionally, it’s common for franchise owners to employ family members, fostering an asset that can be nurtured and potentially sold, including to the owner’s children. The perception that franchising invariably demands significant liquid cash is misleading; many find it a sound investment due to its profitability potential.
Franchising presents an excellent opportunity to start your own business, and it need not be costly or complicated. My advice is to begin with your ultimate goal in mind, including a planned exit strategy. If you’re considering becoming a franchisee, thorough research and asking many questions are essential. By dispelling these common myths, you’ll not only make more informed decisions but also establish realistic expectations for managing your franchise effectively.
