5 Myths about Franchising

What is a franchise? According to business-law.freeadvice.com, “A franchise business is a business in which the owners, or “franchisors”, sell the rights to their business logo, name, and model to third party retail outlets, owned by independent, third party operators, called “franchisees”‘.

This basically means that a franchise is a business that allows other people to invest in their concepts and ideas, and try them in their own area. When you read this description, businesses like Mc. Donalds, or Starbucks might’ve come to mind, and you would be right. Franchises are everywhere now-a-days, and not just in the food industry. Businesses like Great Clips, RE/Max LLC, Ace Hardware Corp, Planet Fitness, Primrose School Franchise Co, and many more are also franchises. In fact, some of the largest businesses currently in business are franchises.

So why would anyone want to not invest in a franchise to become a franchisee? For one, franchises are not for everyone, just as a particular business concept isn’t for everyone. Franchisees are generally required to follow a set of rules, regulations, or other restrictions that are set by the franchisor to help franchisees maintain a certain level of success. One of the main myths about franchise however, is on the strictness of these rules. While franchisors may set restrictions ahead of time for franchisees to follow, these regulations rarely strict-enough to interfere with a business owner’s creativity. In fact, each of these rules or restrictions can be removed if the franchisee can convince the franchisor to do so.

Another reason why someone may be hesitant to become a franchisee is the myth that franchises are expensive. While some may be on the more expensive side, not all of them are. In fact, some franchises require an minimum investment as low as $25k or $50k. Beyond the initial investment, the only difference between a franchise and sole proprietorship (also known as a small business or mom and pop store).

A third myth that about franchising is that they can be risky. This couldn’t be farther from the truth. In fact, because franchises have franchisees follow a previously tested system, franchises are considered to be one of the safest options when it comes to investing in business. As long as franchisees follow the system, franchises can succeed pretty much anywhere if the market supports it.

A fourth myth about franchises is that they’re often overpopulated with other franchisees of the same franchise nearby. When you invest in a franchise and become a franchisee of that franchise, you are given a “territory”. Basically, a territory is an area of land that usually spans somewhere between 5 and 15 miles, (depending on population density, locations, etc.). Inside this territory, another franchise location cannot be formed and other franchisees aren’t allowed to “steal” customers who live there. A territory is exclusive to each franchise, and cannot be infringed upon by other franchisees of the same franchises, meaning less competition in your area.

Finally, a fifth myth about franchising is that idea that there are grants available. Don’t get me wrong, they certainly exist, however they are far and few between. The government rarely provides these grants to business owners even if they qualify, and when they actually do, it’s usually because said business is in a redevelopment area.

If our article caught your interest, or the idea of opening a franchise intrigues you, please reach out to us via the form below so we can talk. We’d love to hear from you!

If our article caught your interest, or the idea of opening a franchise excites you, please reach out to us via the form below so we can talk.
We’d love to hear from you!

5 Myths about Franchising
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