Some people might visit this site and assume we hate franchises. That’s not true at all. Franchising has been around for years, and the business model has helped a lot of people – both franchisees and franchisors – make a lot of money. However, it’s also torn apart families and driven a great many people to bankruptcy. Many more have lost all or most of their retirement savings, and they end up being forced to work well past the years they had originally planned.
That doesn’t mean we hate franchises, though. We just think they’re a bad fit for a lot of people. Are you one of them? Consider the bullet points below…
- Franchises will quote a cost range, and they’ll generally narrow it down as they learn more about you and your location. Whatever they tell you, assume the true costs will be higher. Can you handle that? Can you handle it if they’re 25-50% higher? It’s relatively common for new franchisees to take out additional loans in the early days of their new business. If you can barely handle the stated costs, franchising is almost definitely not right for you.
- Some franchises fail as much as 90% of the time. It’s extremely common for franchises to have failure rates in the 50% range. It’s tempting to tell yourself that you’ll work SO hard that you won’t be the one who fails. It’s tempting to think you’re smarter than the rest. Unfortunately, some things are just out of your control. For all you know, a similar business could open up nearby and you could both end up failing because neither of you are getting enough customers. A big employer could leave your town and take a lot of people and money with it. Roads could shirt and render your location unpopular almost overnight. There are things outside your control. If the loss of your investment would destroy you, franchising is probably not right for you.
- Do you want to run YOUR business, or pay extra for the “privilege” of carrying out someone else’s dream? If you feel entrepreneurial urges and you don’t want to be forced into a mold, franchising is not for you. Even if you like the idea of working with a strict set of rules and guidelines, there’s nothing to stop you from doing research and studying other businesses to form a similar set of company guidelines.
- Do you want to bring something unique and special to your community? Most franchises spell out nearly every aspect of how you can run “your” business. A few will allow you to decorate your store with local memorabilia, but many don’t even let you personalize the experience for your community. It can be nice, when you’re traveling, to spot a familiar sign and know you can get your beloved McDonald’s fries or Applebees Queso Dip – but at the same time, it can also be nice to try something wildly unfamiliar and form a unique memory. What do you want to build? There’s no right or wrong answer, but if you prefer the unique alternatives, franchising is not for you.
The goal here is not to tell anyone they shouldn’t own a franchise. In fact, we may even highlight some franchises with below-average failure rates. The goal here is to be as unbiased as possible and offer potential entrepreneurs some alternatives to franchise investment. If you leave here feeling that franchising is the best choice for you, then congratulations – and best of luck with your new business.