Franchises: fact or fiction?
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Franchises were all the rage for many years -- we watched small name businesses start franchise opportunities, and we watched those franchises pop up everywhere. I see Krispy Kreme and Culver's burgers all over the Midwest. I have friends who run franchise retail stores. They seem like good ways to take advantage of a big marketing campaign and a big name. Franchies aren't for me, though.
Franchising sounds like a good idea until you see that you're not your own boss. Even though you own an independent corporation, you're contractually obligated to follow the rules of the franchising company. In the long run, many franchisees find out they can't print their own signs, make their own ad campaigns, buy products from other suppliers or even move their business if the area they picked is underperforming. A franchise is basically a pretend way to be your own boss -- you still have people above you who can command you around without any cost to them.
On top of really high franchise fees, you'll also be paying a percentage of your sales -- whether or not you make a profit. Some franchises require up to 11% of your gross sales, which can be more than you're paying yourself. Other franchises are contractually allowed to raise the prices of your goods, but demand that you sell those goods at the price level they set. Some franchises can buy back the franchise at a preset price -- and do so once they see you profiting.
I receive a few questions a week regarding one franchise or another. I'll be happy to do the research, and some franchises are actually great ways to get experience (they build the facility for you and you pay it back over a period of years). Some are set up with a profit guarantee or a performance guarantee (where they'll buy it back if it doesn't perform at a certain level). These are rare though. You can do some research into franchises (I actually recommend looking around online at the various franchise opportunities), but read the fine print! You'll often be shocked at what you read.
If you're thinking about a franchise opportunity, drop me a link with the franchise's website. I'll see if I can spot some of the tricks of the trade for you. Don't believe the hype, the highlights and the blinking "Profit!" captions -- very few franchise owners stay in the business long. If you want franchise experience, go work for one and talk to the owner. You'll be surprised how many of them wish they could strike out on their own away from the franchise -- sounds like a typical employee when I've spoken with many.
Franchising sounds like a good idea until you see that you're not your own boss. Even though you own an independent corporation, you're contractually obligated to follow the rules of the franchising company. In the long run, many franchisees find out they can't print their own signs, make their own ad campaigns, buy products from other suppliers or even move their business if the area they picked is underperforming. A franchise is basically a pretend way to be your own boss -- you still have people above you who can command you around without any cost to them.
On top of really high franchise fees, you'll also be paying a percentage of your sales -- whether or not you make a profit. Some franchises require up to 11% of your gross sales, which can be more than you're paying yourself. Other franchises are contractually allowed to raise the prices of your goods, but demand that you sell those goods at the price level they set. Some franchises can buy back the franchise at a preset price -- and do so once they see you profiting.
I receive a few questions a week regarding one franchise or another. I'll be happy to do the research, and some franchises are actually great ways to get experience (they build the facility for you and you pay it back over a period of years). Some are set up with a profit guarantee or a performance guarantee (where they'll buy it back if it doesn't perform at a certain level). These are rare though. You can do some research into franchises (I actually recommend looking around online at the various franchise opportunities), but read the fine print! You'll often be shocked at what you read.
If you're thinking about a franchise opportunity, drop me a link with the franchise's website. I'll see if I can spot some of the tricks of the trade for you. Don't believe the hype, the highlights and the blinking "Profit!" captions -- very few franchise owners stay in the business long. If you want franchise experience, go work for one and talk to the owner. You'll be surprised how many of them wish they could strike out on their own away from the franchise -- sounds like a typical employee when I've spoken with many.
posted by A. B. Dada at 10:25 AM
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