When it comes to franchising, there’s a lot of misinformation out there. Here’s five common myths about franchising and the facts.
MYTH: Franchisees are essentially employees of franchisors.
FACT: Franchisees are small business owners. While franchisees and franchisors have the same goal of creating success for the franchise system, they work cooperatively but independently toward this goal. The franchisor usually provides training, support, and operational guidelines to ensure consistency; however, franchisees are responsible for the daily operations, decisions, employee hiring and management, and, ultimately, success of their business.
MYTH: Investing in a franchise means buying a business.
FACT: When a franchisee invests in a franchise, what he or she receives is the license to operate a business under the brand name of the franchise system, including associated trademarks and operating processes, for a specified amount of time. The franchisee needs to adhere to the standards, procedures, and guidelines set out by the franchisor. (These will be outline in the franchise agreement contract.) The franchisee is responsible for the day-to-day operations of the business and for driving revenue and profitability.
MYTH: Franchising is all big business.
FACT: Franchisees are small business owners who have invested in local communities and support their local economies. Though a franchise system may be regional, national, or international in scope, the success and growth of a system is driven by its network of small businesses operated by local franchisees in each market.
MYTH: Franchisors will accept anyone who shows up with a cheque as a franchisee.
FACT: Joining a franchise system is an important decision that should be well thought out by both the franchisor and franchisee. Franchisees invest not only their money but also their time and effort. Similarly, franchisors want to ensure the continued success of the system by bringing the right people on board as franchisees. There should be a due diligence process on both sides to help confirm that investing in a franchise location with a specific system would be a prudent decision for all involved.
MYTH: Franchises are limited to ‘fast food’ restaurants.
FACT: Any business concept that can be exactly replicated in a new location can grow using the franchise business model. While many people first think of food service when they think about franchising, the reality is that franchises can be found in just about every industry and business sector. Canadian Franchise Association membership includes nearly 50 different franchise categories – from automotive to retail to home-based businesses.
Adapted from the May/June issue of FranchiseCanada. Check out the May/June 2016 issue of FranchiseCanada, on newsstands now, or you can order your subscription by calling 1-800-665-4232 ext. 224.