Franchise Opportunities: 4 Common Myths Busted

Posted by Tom Scarda, Certified Franchise Executive on Dec 18, 2019 5:17:59 PM

In franchising, how to buy a franchise, franchise opportunities, franchise definition

There are more than 4,000 different franchise concepts that span 90 different industries, and many myths surrounding the business program. Although Franchise opportunities represent a fifth of all economic output in America, employ more people than any other industry except the military and one out of seven businesses in the US are a franchise, people are still confused about the attributes of a franchise business model. Here are four common misconceptions about franchising explained. franchise opportunities

Busting The Myths

Myth 1: You Need a Million Dollars

One of the most common misunderstandings about buying a franchise is that you need a million dollars to start. While the amount it takes to start a franchise will vary, it is affordable, especially with financing. Today, someone with a credit score of 680 or higher can obtain financing for a new endeavor. Even some big-name franchises can be had for well under $100,000.

Myth 2: It's A Ponzi Scheme

A legitimate franchising opportunity is far from a Ponzi scheme. In a Ponzi scheme, the people at the top make money from selling the business model rather than a product or service. In a legitimate franchise, one that has a government regulated Franchise Disclosure Document, the franchisee or the person buying into a system, is able to make and keep profits that come from genuine sales of a product or service. 

Myth 3: Only The Parent Company Makes Money

While the parent company does make money via the ongoing royalty, again, the franchise owner gets to keep the profits they generate through sales of the product or service the business is involved in. The more the franchise owner markets the company, the more money they make. In most every concept, the franchisee also keeps the proceeds from the sale of the business unit with only a small transfer fee paid to franchisor. Additionally, franchise companies love it when a franchise owner sells for a large sum of money, hopefully three to five times yearly profit. The company boasts about that because it validates the profitability and soundness of the business model. 

Myth 4: You Have No Control

While any parent company needs to ensure a certain amount of standardization, you do have a say in how you operate the business. Across 4,000 franchise opportunities, various levels of input are required at different franchises. There are some concepts that require 40 hours per week of the franchise owner's participation, which can morph to 60 hours or more. In other concepts, the owner is required to have an outside job, have a manager in place and only put in 10 or 15 hours per week. Know what the reality is before pulling the trigger. With technology, video and most sales transactions happening on a cashless basis, the days of the owner being chained to a store all day are long gone.

Get Your Answers

In America, we are taught to go to school and get a job and work for someone else. We are not encouraged to buy a franchise and control your destiny. There's no money to be made for the education industry if people figure out they can buy into a franchise and be successful, happy and give back to society without a college diploma, but that is a story for another blog. I am here for you to help with the education that you need to choose the right franchise and decide if franchise ownership is for you, or not. It's not for everyone. Some folks do need to do the traditional thing and work a job.

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