Common Franchise Myths Debunked

by Roni Deutch Tax Center

All Chain Restaurants are Franchises
Whenever people see a chain restaurant, from Outback to Olive Garden, they always assume it is a franchised unit. However, there are two business models that these chains commonly use. The first involves selling franchises, and the other involves hiring individual store managers to run corporate owned locations. You might be surprised to learn that the following chains do not franchise: Cheesecake Factory, Lone Star Steakhouse, O Charleys, and Bob Evans.

Buying a Franchise Means Guaranteed Success
Although your odds of success are statistically higher with a franchised business, there are no guarantees. Even with a proven business concept, no business venture is without risks. Hundreds of franchised businesses do close every month, however studies show that the most common reason a franchise fails is because they do not follow the system.

It’s Wasteful to Invest in a Franchise, Just Open your own Business
All franchises have an initial fee that must be paid to open a location, and some people may view this as a waste of money. However, studies show that nearly 95% of franchised businesses remain open for at least 5 years, and 94% of franchise business owners consider themselves successful. The money you give the franchisor lets you in on a proven business model that will make your business much more likely to succeed.

Starbucks is the Worlds Largest Coffee Franchise
As we mentioned earlier, there are two business models used by large chains, and although many people assume Starbucks franchises their stores, they actually do not. The only Starbucks locations that are not corporate owned are those inside hotels and grocery stores.

You need to be Wealthy Already to Invest in a Franchise
Although it can cost tens of thousands of dollars (or even hundreds of thousands depending on the specific franchise), you do not necessarily need to have that much in your bank account. There are multiple different ways you can finance a franchise, including personal loans, self-directed investments, small business administration loans, and home equity loans.

Running a Franchise Business is Easy
Although a franchisor will provide the franchisee with training and direction, the day to day operation of the store is your responsibility as the owner. There is no such thing as an easy business opportunity, and even with a business plan proven to be successful, you are still going to have trials along the way.

Bigger is Always Better
When it comes to selecting a franchise to invest in, yes a big recognizable brand can generate almost instant customers. However, these established franchises often have much higher fees and can be difficult to work with. Some actually prefer smaller franchises as they are easier to work with have can have a more personal touch.

Higher Initial Fees Means Better odds of Success
The old saying, “the more money you invest, the more money you make,” is definitely not true when it comes to franchises. Just because the initial fee is high does not mean that you will have better odds of success. As we mentioned before, all business ventures include risk, and there is never a guarantee that you will be successful, no matter what the franchisor tells you.

-Roni Deutch Tax Center

Learn more at www.franchisebusinessreview.com.