There are many misconceptions about franchises that hide the truth about what they are really all about. Not understanding the true nature of how franchises really work, financially devastates thousands of people and their families every year. All while the parent companies of many franchises rake in millions of dollars. Below are some of the facts.
All the selling points of franchising sound and good, especially when you get the high-end “Welcome Packet” in the mail. The reality is that most people choose to enter franchising on an emotional basis cloaked in “good decisions.” Sure, there are some things that cannot be done outside of being part of a large corporation like spending millions of dollars on national advertisement promoting your business. We see this, in action, with nationwide food establishments. But we must ask the question, “If the franchise model is really so profitable, why are they franchising it in the first place?” That is a good question. Now let me ask it in a different way, “If you had a method of making millions of dollars, that only you knew, would you share it with everybody? Yeah, me either.
Corporations are not in business to help people go into business. They are in business to enrich the officers and shareholders of the company. You must keep in mind that they have spent more on lawyers than the GDP of some countries and have decades of legal experience which places you at the bottom of the food chain. And, if you think you are going to outsmart an army of lawyers and make any real money, you are gravely mistaken, as were the thousands before you.
They know that not all of us are financial gurus, but we want to feel like it by having a chance to "run with the big dogs." They prey on this. What we need is truth. The Truth shall set you free, indeed! We need to be honest with ourselves and realize that “yes” we might have a great work ethic and “yes” we may have learned some things along the way, but we are no match for a battalion of lawyers backed by billions of dollars and there are just some things "we don't know that we don't know."
According to one franchise review company, the median income for franchisees in the food and beverage market is $70k per year for business over two years old and $50k for those under. Now take into consideration that most well-known food establishment franchises cost between $1,250,000 and $2,500,000 to enter in to. How many years will it take you to pay off millions of dollars?
The truth is, to franchisers, you are nothing more than an insurance policy, plain and simple. The reason businesses franchise is that you cannot effectively scale a company to massive levels based on paid employees. “No one minds the shop like the owner.” The franchiser knows that not every location will survive long term, if at all, so they must have people so heavily invested that their complete financial future is on the line. They want people who must fight to the bitter end, no matter how bad things get or how futile. They need you on the hook for hundreds of thousands or millions of dollars because you will be the one in financial ruin if it fails, not them. When a location closes, the franchiser loses a small distribution channel, but the franchisee is often left in complete financial ruin. In franchising you are quite literally paying your life savings, and risking your future, for the privilege of working your fingers to the bone in a job you may just grow to hate. It’s a win, win situation for the franchiser because you take the risk, and you do all of the work.
Why would you consider such a risk?
Well, consider this, some service professionals in different industries can earn thousands of dollars per week without having to answer to anyone except their customers. Many professionals in service industries earn $2000 to $4000, or even more, per week working by themselves? When you add helpers and employees in, the amounts just keep getting higher. Maybe you just want to earn some extra income or to replace the income from your current job. The point is, you can stop making other people rich off of your efforts and start securing a more stable and less stressful future, today, with one simple call.
When starting a service company, outside of franchising, its easy to think you're losing the perceived benefits of franchising. This is a misconception as there are better and more efficient ways to acquire the same benefits allowing you to keep more cash in your pocket and giving you the freedom to make your own choices. Also, you will be able to build a more solid foundation, of your own, instead of playing catch-up day after day making someone else’s company wealthy.
What are some of the misconceptions of franchising?
Misconception 1 and 2 of franchising: Name Recognition and National Advertising.
Service companies are in a unique spot as not everyone needs their specific services on a daily basis. While some companies are in industries that most people tend to use on a more frequent basis such as clothing, cleaning supplies, hygiene supplies, food services, etc. These are the types of businesses that require national advertisement programs just to survive in most cases. Everyone eats food, but not everyone needs custom cabinets or a garage floor coated every day. In laymen’s terms, you may need national advertisement for operating a burger joint but plumbers, car detailers, handymen, window washers, electricians, dog groomers, mechanics, tree servicemen, and most other service companies are more local or regional. Most service providers are rarely known outside of a specific geographical area.
Even the larger, more well-known, service companies in your area may be known only in a few cities or even a few states at best, so a robust local or regional marketing plan can pay huge dividends. It can also give you the ability to scale back or increase when needed regarding specific types of jobs or completion times. Giving you complete freedom and control.
Misconception 3 of franchising: Fully developed production procedures.
Having fully developed procedures sounds great on the surface but when you realize that, in business, problems happen. Extraordinary problems happen and you need the freedom to solve them on the spot without waiting for specific supplies or on some kid in a cubicle, a thousand miles away, to tell you what your allowed to do. What if you find a more efficient way to accomplish a task or a better product to use? You have just violated your franchise agreement by doing the right thing. What you really need is the flexibility to determine what makes sense for you and your company.
Misconception 4: Management Systems
Some service professionals just want to work by themselves and not worry too much about administration. Others want to grow much larger, which means they need well thought out management systems. Software is a major consideration. Customer Relations, Tasks, Sales and Accounting are all items that larger companies manage with custom software. The great thing about the day and age we live in is the access to inexpensive software and technology. Franchisers sell their software systems to their franchisees with a profit tacked on for themselves. You can get the same or similar software at a fraction of what they would charge you. Most software developers have small business entry points for their software, saving you money and allowing you to grow at your pace.
Misconception 5: Corporate Training
Like with management systems, franchisers want you to believe that their training is the best available. They require you to go, on your dime, or pay for your employees to go out of town for training that can last weeks or months. Decades ago, there may have been a value in this, however technology has surpassed any value that franchises can offer regarding training. When you train under one company you are only as good as their weakest person. There are professionals, at the top of their skill set, that produce daily training content and lay it out for the world to see on sites such as YouTube and Rumble. Most of the content rivals that of any multi-million-dollar corporation and you can learn from the best of the best in any industry. These professional creators have discovered that the platforms, they post on, pay good money for good content giving you the added benefit of getting it for FREE.
If you want to build a tile shower, step by step, you can watch ten different professionals complete ten different projects, taking what works for you and applying it to your creativity. Same goes for any other service industry. Remodeling, Pool cleaning, dog walking, window tinting, cabinetry, and so on. No matter what industry, you and your staff can stay well trained on the latest supplies and techniques without the expense of having to fly everyone all over the country. You can add service offerings as you see fit and try out new areas of service that will bring more income.
Our job at Five Star Services Network, Inc. is making you competitive with all other companies in your area, whether local or national. Call us today to discuss how Five Star can help you in getting started or in enhancing what you are already doing.