• Expert Advice

People read stories about successful franchisees and think. “I could do that!”  Perhaps they could, but before you rush out to make an investment you may live to regret, you should do some careful research – not every statement about franchising that you may read is true.

Some myths to watch out for:

Myth 1: A franchise guarantees success

No, it doesn’t!

And anyone who tells you otherwise is foolish.  A properly constructed franchise is a blueprint for business success, nothing more and nothing less.  Every genuine franchisor will tell you that the success of the franchise depends on the franchisee’s ability to make the best of the guidance and support that the franchisor’s system offers.

Myth 2: There is a franchise for everyone

No, there isn’t!

It is true that franchises come in many shapes and sizes, and cover a wide variety of industry sectors, but all business format franchises have several things in common, of which the following stand out:

• A franchised network’s success depends on every branch/outlet doing the same thing within the proven business model.
• Every member of the network is expected to live, eat and sleep the brand.
• This involves activities that interlock to create a successful network, and this may be problematic.
• Some individuals resent being told in detail how to carry out certain tasks. They think they know a better way of doing things and want to be left alone to get on with it.  Of course, they may have found a better way, but as franchisees, they can’t just go ahead and implement it.
• Others see the franchisor’s efforts to maintain network-wide standards as interference in their business. They receive visiting field service consultants with hostility and refuse to share information with them.
• Such franchisees overlook the fact that they operate under the franchisor’s brand. This impacts the national standing of the brand.  It is in the interest of the brand, and all members of the network, that the franchisor exercises operation control.
• In some cases, the requirement to keep the businesses’ administration up to date and submit reports on time creates friction. Whether the owner of a business is a franchisee or operates independently, unless he or she keeps an eye on the financial health of the business, problems are bound to arise.
• As seen from the franchisor’s viewpoint, financial and other operational data, received in good time, are the lifeblood of the business, because they inform the direction the business needs to take. Responsible franchisors will not compromise on this requirement.

These are just some of the non-negotiables that franchisees have to live with.  Individuals who find it difficult to comply are unlikely to be happy in the franchise environment.

Myth 3: Franchisees are expected to act like zombies

No, they’re not! 

The franchisor has spent a lot of time and money on developing the system and perfecting it.  Even more importantly, the brand has created certain expectations in customers’ minds.  They expect to receive the same product and/or service and enjoy an identical buying experience with whichever outlet of the network they do business with.

This is how it should be.  Otherwise, why invest in a franchise in the first place?

It follows that standardisation is necessary.  However, if a franchisee indeed discovers a better way of doing things a good franchisor will want to hear about it.  He or she will have put mechanisms in place that allow head office staff to test the idea, usually in one or more company-owned stores.  If the franchisee’s idea is found to be better, it may be implemented into the network.

Myth 4: A chance to leave the rat race

This is our favourite myth.

Some people believe that they can invest in a franchise, build it up to a level that allows them to earn a comfortable living, and then sit back and enjoy the fruits of their labour.  We don’t know of any franchise that delivers on the expectation.  It is far more likely that the opposite is the case.  The franchisee will be expected to work harder than he or she has ever worked before, with good reason.

Every network’s strength depends to a large extent on market share.  Generally speaking, the bigger the share of the market a network holds the stronger it is.  This isn’t just a matter of pride, of being bigger than the competition.  It impacts business realities such as the ability to provide top class franchisee support and to negotiate preferential supply arrangements.

In a franchised network, this forms a chain reaction – unless every franchisee maximises unit performance at the local level, the totals won’t stack up and the brand will lose power.

It is precisely for reason that some franchisors refuse to accept absentee owners as franchisees.  Absentee-owners, or investors, are individuals who are prepared to fund the operation of a unit but want to entrust the staff with its day-to-day management.

It has been shown time and again that owner-operated units significantly outperform units that are entrusted to managers, and seasoned franchisors know that.

Myth 5: All franchises are the same

No, they’re not! 

This may seem to contradict what we said earlier about franchisees having certain traits in common.  We were referring to the business format franchise model.  This is by far the most popular format, but another format exists as well.

It is known as the product/trademark franchise model, and it differs in some important respects:

• A product/trademark franchise focuses on the brand name and the product or service.
• Franchisors will guard these two aspects of the franchise package but will not provide the level of the initial and ongoing support of a business format franchise.
• Some individuals will embrace the product/trademark concept because it allows them a greater degree of freedom, but this freedom comes at a stiff price.

Offering initial and ongoing support, providing access to proven systems and procedures, and operating a dedicated franchise support infrastructure makes business format franchising successful.  Both franchisors and franchisees recognise this, and former product/trademark franchises are increasingly converting to fully-fledged business format franchise systems.

Myth 6: Franchised networks are failure-proof

Not necessarily!

While most franchised networks are indeed stable, some exceptions exist.  Firstly, some start franchising before they have the necessary infrastructure in place.  They believe in the concept and promote it enthusiastically, but eventually, they run out of steam and the network folds.

As long as prospective franchisees do their homework properly, they should be able to spot these franchisors easily.  We recommend that such franchisors should be avoided, no matter how attractive their offer may appear to be.