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The truth about franchising

Discover the five truths about franchising that you should know before you decide whether or not to become a franchisee.

By Editorial team | Updated July 27, 2021 (Published 21/3/2018)

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For many budding entrepreneurs, the opportunity to buy into and grow a franchise is the perfect solution to their business ownership dreams.

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Moreover, it is easy to see why. There are undoubtedly many benefits to owning and operating a franchise, but there will probably be some challenging and tough times too. Without further ado, here are five truths you need to know before becoming a franchisee.

1. It is hard work

Successful franchises are not guaranteed, no matter what the franchise brochures may say. If the reason that you are investing in one of the recognisable high-street franchise brands is that you think it is an easy route to success, then you are likely to be disappointed.

Yes, it is true that customers are more likely to have an awareness of the products or services you will be offering, but brand recognition alone doesn’t equate to success. You need to be ambitious, dedicated and enthusiastic to run a franchise. You must be ready to put blood, sweat and tears into making your investment pay off. As with any business, success takes hard work; and lots of it.

2. You probably won’t make a profit straight away

Before you even become a franchisee, you should invest time in developing a business plan. Not only will this be a crucial document when securing funding for your franchise venture, but it will also set expectations about when you are likely to turn a profit. Your business plan will detail your forecasted cash flow and breakeven point, so there should be no surprises of when profitability will arrive.

However, because of the misconceptions about franchise brands being an automatic route to success, this can be a shock to first-time franchisees. Therefore, the franchisor and your lender should educate you in the importance of working capital. This is money that you have available to cover the costs of running your franchise until it can fund all outgoings. Additional working capital may also be necessary to support your business through its ups and downs even when it is established.

3. You will need to promote your franchise

There is more to the cost of a franchise than the initial franchise fee. There are also ongoing fees to consider. One such regular payment that you are likely to make is a contribution to a centralised marketing pot. This fee tends to be a percentage of gross sales and is paid to the franchisor to cover the costs of nationwide marketing campaigns.

These massive advertising campaigns provide a significant advantage for you, particularly over your independent business counterparts. However, be mindful, that as the marketing is at a brand level, it does not necessarily raise awareness of your franchise locally.

To become one of the successful franchises, you will still need to promote your business in your area. Popular promotions include discounts or competitions, sponsorship of a local sports team or donating prizes to at a charity event.

4. You are the boss – well, some of the time

The attraction of franchising for many is the opportunity to become a business owner, but with less of the risk. However, despite being in charge most of the time, you are also answerable to someone else. The franchisor has the ultimate control, yet you still have the responsibility for the running and the profitability of the business. It is a delicate balancing act that some entrepreneurs may find difficult to swallow.

The truth is, successful franchises are based on compliance and consistency, not individualism and freedom. When you invest in a franchise, you must realise that following the franchisor’s rules is an obligation, rather than an option. If you have got a strong desire to be creative and innovative as a business owner and craved the control to run things your way, then a franchise may not be the right choice for you.

5. You will love it

Yes, running a franchise takes hard work; it takes time to raise awareness and make a profit; requires you to follow someone else’s rules – and you will love it.

When you start to see the benefits of your commitment and determination, you will wonder how you ever worked for someone else. You will discover that the franchise model gives you the flexibility that other opportunities cannot. When you are a franchisee, you will see potential in lots of situations. Rather than viewing new or challenging events as a negative experience, you will see it as a chance to learn and improve your business.

You will enjoy meeting other franchisees to share stories, experiences and franchise information. You will become a more knowledgeable and stronger entrepreneur thanks to the skills you will acquire as a franchisee. Your passion will be infectious, and you will inspire others to take a risk and start their own business just like you did.

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Tags: Business ideasFranchising

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