Many people hold some erroneous beliefs about franchising which can mislead them and create a lot of unnecessary pain.
Myth 1: If I franchise my business I will make tons of money.
Yes, there is a good probability that franchising a business will result in significant financial gain. But, unfortunately, this is not always the case, at least not in the beginning. To be successful, a franchise must have a viable and sustainable business format (See earlier Blog entry on Sustainable Franchising). It must also be properly marketed so that the franchise network can grow before substantial gains are received.
A company contemplating expansion via franchising needs to be prepared to make a sizable upfront investment. Depending on the initial franchise fee, this investment can be recouped after selling the first few franchises; but the trick is that to sell those first franchises is not as easy as many people think. (Refer to the Blog entry about selling the first Franchisesfor more information on this subject.) Time and money must be invested to attract the right candidates before monetary gains can be enjoyed by the franchisor.
Myth 2: If I franchise my business I won’t have to work as hard as I am working now … I can just retire.
In most cases franchising a company will simply change what the owners do rather than reduce their workload. That is, franchising calls for different work from that previously required to run the business; and, while different, it is still work. Moreover, successful franchising requires a lot of effort especially in the first few years. During this time, the founder is in learning mode which calls for a lot of energy expenditure and a strong resilience. However, once a franchise company has the ability to hire an effective management team, the founder can take it easier. In most cases, with today’s technology, all that is needed to run the franchise company from home, a mountain cabin or the beach, is a way to access the Internet and a reliable telephone line. But it takes time to get there.
Myth 3: Once I teach a franchisee how to run the business I do not have to do anything else for them. After all, they signed an agreement to pay me royalties for a long time.
Many people considering franchising their business are under the impression that because an agreement exists between them and franchisees they do not need to be concerned with innovation and value added services to franchisees. Yes, the franchise agreement exists for the protection of the franchisor as well as all franchisees. Yet, if franchisors do not continually provide value, they will have disgruntled franchisees that will thwart the growth of the company and some will stop paying royalties and other financial obligations. The franchise agreement gives franchisors the right to enforce the agreement and begin legal action against the delinquent franchisees, but this is a costly enterprise. The most effective franchisor philosophy is to thrive to serve franchisees by creating cost savings as well as new products and services that can augment the profits of franchisees and help them become more efficient.
Myth 4: All franchisees are highly motivated. They have paid a lot of money to buy the franchise; they are going to do everything they can to make it work.
Another fact that can be shocking to a new franchisor is to realize that not all people making a large investment are automatically highly motivated to succeed. New franchisors tend to project their own values onto their franchisees. It can be an unpleasant discovery to find that many people are not self motivated and to be able to succeed they need high degree of encouragement, detailed instructions and a strong support and accountability system.
Myth 5: My franchisees should have no problem learning the business and doing all that needs to be done to open it and manage it successfully; after all, I am doing so much for them.
Many new franchisors fail to understand that franchisees are not true entrepreneurs; that they are not like them who had an idea and just made it work. Franchisees see the value of paying the franchisor so they can learn and avoid mistakes; they are more risk averse than the founding franchisor.
Some franchisors simply can’t accept that most franchisees will be overwhelmed with all that needs to be done to start the business. They also tend to forget what it was like for them when they first started. The latter is natural, but it is critical for franchisors to understand that the first 3 to 9 months in the life of franchisees are very difficult. During this time franchisees are truly out of their comfort zones and fear prevents them to be at their best.
Smart Franchisors take it slow and are patient. They break tasks down so franchisees can absorb what needs to be done and implement the franchise system successfully. They remember that if franchisees can’t conquer tasks they will feel like failures which creates more fear and prevents them from getting in the mental state that engenders success.
amazing stuff thanx 🙂