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Powills: Before Buying a Franchise, Read This

Congratulations, you have decided to take that plunge into business ownership. Rather than creating something from scratch, you have decided to join the hundreds of thousands of people who went from prospect to franchisee — choosing to follow a proven system that has been tried and tested. In fac.....

By Nick Powills1851 Franchise Publisher
SPONSOREDUpdated 12:12PM 02/27/14
Congratulations, you have decided to take that plunge into business ownership. Rather than creating something from scratch, you have decided to join the hundreds of thousands of people who went from prospect to franchisee — choosing to follow a proven system that has been tried and tested. In fact, you were willing to pay $20,000, $30,000, $40,000 in franchise fees for the license to use that model. Nice work. Now comes the hard part. Below you will find 10 myths about franchise ownership that I have heard many say, yet few realize. In the style of David Letterman, here you go: 10. You can be the ultimate entrepreneur as a franchisee. Wrong. When you decide to buy a franchise, you are giving up your right to make changes in that business. That isn’t your role. Your role is to listen, absorb and disperse the models, systems and processes created by the franchisor. It is not your job “test and trial” systems they have put in place (unless they ask you, of course). You paid that franchise fee. Why? Because that fee buys you the right to operate their car, and just like a license to drive, it can be taken away. If you want to be the ultimate entrepreneur, there is nothing wrong with that — but start your concept from the ground. 9. All suppliers will answer to your call whenever you want. Wrong. Many times, suppliers are hired and paid for by the franchisor. This means they report to the franchisor, not to you as the individual. Often times, the franchisor hires these vendors or suppliers to help you — because franchisors really do care about your success as an entrepreneur — but they are not your personal team to beat up. Also, those who work with the franchisor will be much happier working with you if you treat them with respect. No supplier is out to get you. They, too, really care about your success — because that will ultimately make them look good to their boss, the franchisor. 8. That earnings claim means I will make that money. Wrong. And you shouldn’t want to. An earnings claim (Item 19 in the FDD) provides you with a glimpse of what the average (in most cases) unit makes. Some franchisors use this strictly as a marketing tool and only highlight the top of the group. Regardless, don’t buy that franchise if you plan to be average. Buy that franchise if you plan to be fantastic, the best, No. 1. Without that mindset, it probably won’t work. 7. When I open the doors, I will instantly make money. Wrong. This is no late night infomercial. This is franchising, brother. Yes, many concepts and brands have been proven to make money. But, making money is based on people. People buy from people, not from brands. Your success is not the responsibility or fault of the franchisor, it is ultimately yours. You have to kiss babies and shake hands in your local community — in the places where the franchisor will not have human reach. Your success is going to be based on your willingness to work hard and build a business. Franchising is not a get-rich-quick model. If you believe it is, good luck. Also, if you believe you will get rich off of one location, you are probably wrong. In many cases, you can buy yourself a job with one location, but those who make more money in franchising than ever before are the ones who eye multiple locations. Multi-unit operators and visionaries are very attractive to franchisors. 6. You are guaranteed success as a franchisee, because the franchisor was successful. Wrong. Business is a risk. It is a huge risk. While there are millions of success stories, there are also millions of stories of failure. You are risking, in many cases, your life savings for that chance to be your own boss. That is awesome. But be ready to work hard, because a franchise doesn’t mean business magic. Also, come to the table with working capital. Because success is not guaranteed, you should have a pool of money for rainy days (and you will have those, especially at the beginning). 5. Once I have signed a franchise agreement, I can do whatever I want with the brand — I am an owner. Wrong again, buddy. The franchisor still owns the trademark. This means, you can’t use the trademark unless previously approved by the franchisor. This means, legally, you could have issues creating a Facebook page or Twitter page with the logo without the consensus of the brand. You also can’t crop the logo, chop the logo, take a bite out of the logo, change the logo’s color or any of that nonsense. You bought the right to operate a unit of someone else’s brand. Stick to it. 4. A franchisee of the brand I am exploring told me that the brand sucks, that the support sucks and that I should stay far away. OK, now go jump off a bridge. Everybody is different. No two people are alike. Many franchisees fail because they believe the myths, not because the franchisor is bad. If you get to the point of due diligence, don’t believe the hype, good or bad. Use franchisee feedback as tidbits for helping you make your decision, but capture many opinions. 3. I don’t have to read the FDD because it is long and boring. Correct. You do that. Don’t spend the time doing your homework. That sounds like a great idea. Even if that’s what you believe, call an attorney and have them review it for you. You are making a life decision — hopefully one for the best. Put the right time and energy into that decision. You won’t regret it later. 2. I made the decision to buy your brand, now give it to me. Wrong. The franchisor ultimately has to make the decision on you, too. It is a two way street. Just because you have the funds, that doesn’t mean they have to automatically give you the franchise rights. Now, often times, the franchisor loves the taste of that $30,000 franchise fee, so, it’s tough to say no. But, a good franchisor will only take you on if you are the right fit. 1. I hate these stupid sales calls from the franchise development team, so I will call them back when I want. Yeah, that sounds like a great way to run your business. A lot will be told in the initial phases. If the franchisor has to chase you down now, that probably means you won’t take their calls later. If you click that special “Apply Now,” “More Information,” or “Request Information” button on their website, then be ready for it to come your way. Remember, it’s the job of the development team to locate great people for their brand. If you give your name, you will be called. This is called a sales process. Treat people the way you want to be treated — all throughout the process—and you will be in good shape to get going.