Investing in a franchise and starting a business is a huge career move. It is also one that comes with a lot more franchise information than you might expect. But hereโs the catch. The legal paperwork doesnโt tell you everything. And some of the important truths can get overlooked. So, if you want to avoid unwelcome surprises down the line, find out everything you need to know, including key points the industry doesnโt always highlight.ย
Surprising Facts About Franchises
Your franchisorโs brochure or information pack will give a good insight into their business model. But you need to dig for more details. And itโs not enough to read the franchise agreement and hope for the best. Take in the information and these eye-opening franchise facts that might surprise or even shock you.
Franchise Statistics
The statistics on starting a new business arenโt exactly motivational. i.e., many end up failing in the first year. However, the franchise business model is more popular than ever. Franchise statistics show there are over 800,000 franchises in the US alone. And theyโre generating more than $800 billion annually. Moreover, thereโs more choice than ever from car washes and oil changes to childrenโs tutoring services and haircuts.ย
Franchise Success Rate
You can read survey headlines that claim 99.5% of franchises succeed while 50% of startups fail. However, these numbers are misleading. Yes, franchises do have a stronger track record than independent startups thanks to brand recognition and support. However, donโt get too relaxed and assume your franchise will automatically be successful. Business failures happen on both sides. Franchise mistakes and failures happen.
Franchise success rates depend on various factors, such as the sector, franchisee value, the franchisor and how well they screen potential franchisees. Because not everyone is cut out for business ownership. A more realistic viewpoint is that franchising has a growth advantage in the first two years. But after that, youโll still need to work as hard as the next person.ย
Small but Mighty Teams
You might think a franchise brand is all about the giant corporate office. However, this isnโt always the case. Many successful franchises have surprisingly small and efficient HQ teams. Each location hires its own staff, while the core team focuses on training, support and brand consistency.ย
Stricter Selection Process Than You Think
Despite what most people think, not everyoneโs cut out for franchising. In fact, franchisors reject more applicants than they accept. Theyโre not just looking for capital. It is all about a dynamic franchisor-franchisee relationship. Therefore, theyโre looking for the right personality fit, someone who is disciplined, hard-working and committed to representing the brand. Equally important, the franchisor has to impress you and share your goals.
Master Franchise Is a Missed Opportunity
Many entrepreneurs donโt think beyond a business format franchise. For example, you might see yourself running one operation in one territory. But youโd be surprised at the other opportunities that go untapped in the franchising world. This includes the master franchise.
Master franchising means you can open multiple units and recruit sub-franchisees, earning a share of their fees and royalties. In other words, youโre not just an operator, you become a mini-franchisor in your own territory. Itโs a great concept that entrepreneurs often overlook.ย
You Need More Than a Franchise Checklist
A franchise checklist is a great starting point. But thereโs more to franchising than checking boxes. Youโve got to dig deeper to get the real story behind the brand. Speak with existing franchisees to get their take on the experience. Use a franchise forum to see what others are saying. Additionally, explore options of franchise partners if youโre unsure about embarking on this venture alone.
Some Franchisees Donโt Read the Small Print
A scary fact is that some franchisees are willing to invest thousands without going over the official paperwork properly. For example, the franchise disclosure document (FDD) can be hundreds of pages long, so there is a lot to cover. However, you canโt skip over any items because it is a legally binding contract.ย
Not All Support Systems are Equal
Most franchisors are hands-on in the first year, providing you with training and support to get going. But it might come as a surprise that some franchisees are left on their own after the initial startup phase.ย
The good news is that there are great franchisors out there who offer ongoing support throughout the entire relationship. This includes refresher training courses, championing innovation and new technology, and getting creative with marketing campaigns. Ongoing support makes perfect sense. Everyone has to pull together to make this business partnership successful.
Never Work With Animals and Children?
Contrary to the old saying never work with animals and children, franchising has proven the opposite. Childrenโs tutoring, early education, and pet supplies and doggy day care are part of a thriving franchise sector.ย
From Hollywood movies to water-saving car washes, if thereโs consumer demand, thereโs potential for a franchise model. The key is choosing something that aligns with your passion, whether thatโs sustainability, education, or pets.
Not for the Work Shy
Franchising might be the easier route into business ownership, but itโs no walk in the park. Yes, a business-in-a-box concept can take the stress out of the startup experience. However, every new business owner has to put in long hours. Youโre going to have a heavy workload, especially in the early months, not a vacation.
Not Just About the Money
Franchising can be very profitable. But living with purpose isnโt about chasing profit 24/7. Yes, making money matters. However, the happiest franchisees are building a business that aligns with their goals and values. Whether itโs eco-friendly cleaning, education, or health and fitness, your passion for the brand will carry you through the tougher days.
Jack of All Trades
Everyone has heard the saying โJack of all trades,โ but most would never associate it with owning a franchise location. However, if youโre set on becoming a franchisee, youโve got to be prepared to wear many hats. Until you hire and train a team, youโll be hands-on, from creating schedules and doing the payroll to serving customers and promoting the brand.
Serious Long-term Relationship
Youโre in it for the long haul. Franchise contracts typically last 10 to 20 years with ongoing royalties. Itโs surprising how many entrepreneurs underestimate this commitment. The reality is youโre tied to this brand, and the brand is tied to you. The best franchisors donโt just take your money and walk away. They stay invested in your success for the duration of the relationship.
Open Network
Most reputable franchisors encourage you to talk with current franchisees before signing. These candid conversations are goldmines of real-world insight into earnings, challenges, and daily life. If a franchisor wonโt let you contact existing owners? Thatโs a red flag. Also, be sure to have questions to ask the franchisor.ย
Be Your Own Boss (Up to a Point)
If youโre seeking out franchise opportunities, you want to be your own boss. And itโs true, youโll run your own business. But donโt forget the franchisor sets the rules. From branding to suppliers and sometimes even pricing, HQ has the final say.ย
Successful franchisees thrive within these boundaries while still making the business their own. You just need to work with the system, not against it. And you can let your personality shine through, see below.
You Can Bring Your Personality to the Brand
Franchising has a reputation for having a rigid business model that you must follow to the letter. I.e., everything is standardized and identical. Yes, consistency is key to building a strong brand.ย
However, forward-thinking franchisors encourage creativity at local level. So, you can bring your personality to the business, especially when it comes to community partnerships and local marketing campaigns.ย The personal touch can often set you apart from the competition and help you build award-winning customer service.ย
Franchise Contracts Are Negotiable
Surprisingly, negotiating your franchise contract is possible. Most research shows the opposite, but a franchise lawyer or franchise consultant can walk you through the process. Theyโll work with the franchisor to find the best options for you, and at the same time maintain the corporate brand and integrity of the company.
The Truth About Franchise Loans
You often hear that banks or professional finance services love franchises due to their proven business model. However,ย franchising financing isnโt always straightforward. Moreover, the information available can be confusing. There are different options, from an SBA loan for franchise funding to the franchise itself offering loan programs.ย
Furthermore, there is no guarantee lenders will cover 100% of the cost. You might have to bring at least 25% of the investment in cash or personal equity. So, donโt assume the brand name alone is enough to seal the deal. Lenders still look closely at your credit history, liquidity, and business plan. On the plus side, being linked to an established franchise system does give you a stronger case for securing a loan compared to starting from scratch.ย
More Than a Franchise Fee
If you think youโre only financial output is the franchise fee, youโre in for a shock. Ongoing royalties, marketing contributions, training, and supply markups add up fast.
Always look beyond the franchise fee and ask for a full breakdown of all recurring costs before signing your contract. Knowing the real numbers upfront can mean the difference between healthy profit margins and constant cash-flow stress.
Franchise Facts: Resale Isnโt a Given
Many people think they can just sell their franchise if things donโt work out or if itโs not for them. The reality? Franchisors often control who you can sell to, and resale markets can be tough. Thatโs why itโs essential to think about your exit strategy before you even sign the contract. Go over your franchise rights to ensure you know where you stand.
Conclusion
Absorbing as much franchise information as you can is time well spent before you leap into business ownership. Donโt be afraid to dig deeper and question everything. Franchising is an excellent opportunity, provided you go into it with your eyes open.
If youโre looking for a franchise with long-term support, strong brand values, and innovative technology, consider DetailXPerts. Our eco-friendly mobile auto detailing and cleaning company prioritizes people, profit and the planet, giving you a green business model with great potential.
