Small Business Articles
10 Myths Surrounding Cheap Small Business Franchises
March 20, 2009
From the Grimm brothers’ shoe-making elves to the pantheon of greek mythology, there are a plethora of stories people tell to explain what they don’t really understand. Not all of our myths are as fantastical as centaurs and trolls, though; some are actually far more boring. And ironically, it’s often the most boring myths that cause the most confusion and fear, like the host of myths surrounding cheap small business franchises. With just a little misinformation, businesspeople are often driven to a completely unfounded view of those small businesses with cheaper initial prices, but with a little correction, all that can be remedied. Here are 10 of the most prominent misconceptions about cheap small business franchises.
1) Franchises Are Guaranteed To Succeed.
As any math or science professional will tell you, there is a great deal of difference between probability and certainty. Some estimates gauge that franchises have a 92% success rate, while more than half of non-franchised small businesses tend to collapse within the first five years of operation. Franchised businesses, therefore, are much more likely to succeed, but that’s all: there is no guarantee on anything.
2) Small Business Franchising Lets You Be Your Own Boss.
One of the most common reasons people have for wanting to start a franchise business is to be their own boss. To some degree they are, at least if "being your own boss" means that franchise owners get to determine their own schedules, choose their clients, and hold sole responsibility for the success of their operations. However, because the small business concept, model, procedures, products, and services are all in the hands of the franchisor, and owners have to play by their rules, franchisees do not have as much control as "being your own boss" might imply.
3) Higher Priced Small Businesses Provide A Higher Income.
This is simply not true. The income potential of a business is based on the functionality of the business model, the talent and drive of the franchisee, demand for the product, current market trends, and many other factors that have absolutely nothing to do with how much was spent to purchase the business for sale.
4) Higher-Priced Businesses Have Better Business Plans.
A little more accurate than myth #3, this notion still leaves out some of reality’s complexity. A steep price tag on a franchise may be indicative of a company with a stronger business model and a larger, more involved central team, but it may also simply be a marker of a franchisor who wants to make more money up-front, rather than make more money over time. Only looking at the business system itself will tell you whether or not it’s a good one.
5) Recognizable Brands Make The Best Franchises.
There is something to be said for working under a name that the average person recognizes, and most of what can be said for it is that it makes marketing a great deal easier. Still, being a relatively unknown business is not necessarily a huge setback, as long as the franchise business comes with a great business model and marketing strategy. Particularly in home based business, there are few, if any, truly big-name franchises, but that doesn’t at all mean that there is a low ceiling on the possibility of success.
6) Buying A Franchised Small Business Is Cheaper Than Starting A New Business.
While this is true in some cases (vending machines for example), the average small business franchise will require a bit more of an investment on the frontend. A franchisee is often purchasing a business model that has gone through years of refinement, comes equipped with everything necessary to begin work, a fulltime staff ready to help 24/7, and sometimes even an introductory client list, all of which comes with a financial cost that the franchisee is partially responsible for. It’s worth it, of course, but it’s probably not cheaper than going it alone.
7) Low On Cash? You Should Buy The Cheapest Business Possible.
The cheapest business opportunity may be the best choice in some situations, but no business is the best simply by virtue of being the cheapest. It depends very much on how well the business is designed, how well it fits with the experience and talents of the franchisee, and how the market looks. Don’t just buy the cheapest to save a few hundred dollars; buy the best, even if it costs a little more. A business should be a commitment for the foreseeable future, so in many cases, the money you save up front will pale in comparison to the value gained by buying the right franchise, not just the franchise with the right price.
8) Working By Yourself Puts Everything On Your Shoulders.
Though the franchisee is ultimately responsible for the success of his business, whether it’s work at home or at an office location, the beauty of running a small business franchise is that there is always a central staff ready to back you up whenever they’re needed. The popular saying is that "you work for yourself, not by yourself."
9) Cheaper Businesses Require A Lesser Time Commitment.
Some people purchase a less expensive franchise hoping that it means they won’t have to commit as much of their time to it. In reality, financial expense does not equate to time expense. No matter what a franchisor or broker may say, all business opportunities require a sacrifice of time, period.
10) Small Businesses Are At The Mercy Of Their Clients.
The old saying is a pervasive one: "the customer is always right." That concept has convinced some businesspeople that particularly small businesses and work at home businesses need to always appease their clients to stay in business. "The customer is always right" may be a good thing to tell employees who have a tendency to spout off at the mouth, but it’s not a universal truth; sometimes the customer doesn’t have any idea what’s right, and it’s up to the owner to determine what’s best for the business, even when a customer may disagree.
There are many ways that facts become skewed and myths about cheap small businesses begin to raise their ugly heads, but untruths need to be curbed quickly. The longer that lies, even the nice-sounding ones, influence you, the less productive your business will be. Whenever you hear a report about franchise business of any size or cost, go to the source, not for hype, but for facts.
From the Grimm brothers’ shoe-making elves to the pantheon of greek mythology, there are a plethora of stories people tell to explain what they don’t really understand. Not all of our myths are as fantastical as centaurs and trolls, though; some are actually far more boring. And ironically, it’s often the most boring myths that cause the most confusion and fear, like the host of myths surrounding cheap small business franchises. With just a little misinformation, businesspeople are often driven to a completely unfounded view of those small businesses with cheaper initial prices, but with a little correction, all that can be remedied. Here are 10 of the most prominent misconceptions about cheap small business franchises.
1) Franchises Are Guaranteed To Succeed.
As any math or science professional will tell you, there is a great deal of difference between probability and certainty. Some estimates gauge that franchises have a 92% success rate, while more than half of non-franchised small businesses tend to collapse within the first five years of operation. Franchised businesses, therefore, are much more likely to succeed, but that’s all: there is no guarantee on anything.
2) Small Business Franchising Lets You Be Your Own Boss.
One of the most common reasons people have for wanting to start a franchise business is to be their own boss. To some degree they are, at least if "being your own boss" means that franchise owners get to determine their own schedules, choose their clients, and hold sole responsibility for the success of their operations. However, because the small business concept, model, procedures, products, and services are all in the hands of the franchisor, and owners have to play by their rules, franchisees do not have as much control as "being your own boss" might imply.
3) Higher Priced Small Businesses Provide A Higher Income.
This is simply not true. The income potential of a business is based on the functionality of the business model, the talent and drive of the franchisee, demand for the product, current market trends, and many other factors that have absolutely nothing to do with how much was spent to purchase the business for sale.
4) Higher-Priced Businesses Have Better Business Plans.
A little more accurate than myth #3, this notion still leaves out some of reality’s complexity. A steep price tag on a franchise may be indicative of a company with a stronger business model and a larger, more involved central team, but it may also simply be a marker of a franchisor who wants to make more money up-front, rather than make more money over time. Only looking at the business system itself will tell you whether or not it’s a good one.
5) Recognizable Brands Make The Best Franchises.
There is something to be said for working under a name that the average person recognizes, and most of what can be said for it is that it makes marketing a great deal easier. Still, being a relatively unknown business is not necessarily a huge setback, as long as the franchise business comes with a great business model and marketing strategy. Particularly in home based business, there are few, if any, truly big-name franchises, but that doesn’t at all mean that there is a low ceiling on the possibility of success.
6) Buying A Franchised Small Business Is Cheaper Than Starting A New Business.
While this is true in some cases (vending machines for example), the average small business franchise will require a bit more of an investment on the frontend. A franchisee is often purchasing a business model that has gone through years of refinement, comes equipped with everything necessary to begin work, a fulltime staff ready to help 24/7, and sometimes even an introductory client list, all of which comes with a financial cost that the franchisee is partially responsible for. It’s worth it, of course, but it’s probably not cheaper than going it alone.
7) Low On Cash? You Should Buy The Cheapest Business Possible.
The cheapest business opportunity may be the best choice in some situations, but no business is the best simply by virtue of being the cheapest. It depends very much on how well the business is designed, how well it fits with the experience and talents of the franchisee, and how the market looks. Don’t just buy the cheapest to save a few hundred dollars; buy the best, even if it costs a little more. A business should be a commitment for the foreseeable future, so in many cases, the money you save up front will pale in comparison to the value gained by buying the right franchise, not just the franchise with the right price.
8) Working By Yourself Puts Everything On Your Shoulders.
Though the franchisee is ultimately responsible for the success of his business, whether it’s work at home or at an office location, the beauty of running a small business franchise is that there is always a central staff ready to back you up whenever they’re needed. The popular saying is that "you work for yourself, not by yourself."
9) Cheaper Businesses Require A Lesser Time Commitment.
Some people purchase a less expensive franchise hoping that it means they won’t have to commit as much of their time to it. In reality, financial expense does not equate to time expense. No matter what a franchisor or broker may say, all business opportunities require a sacrifice of time, period.
10) Small Businesses Are At The Mercy Of Their Clients.
The old saying is a pervasive one: "the customer is always right." That concept has convinced some businesspeople that particularly small businesses and work at home businesses need to always appease their clients to stay in business. "The customer is always right" may be a good thing to tell employees who have a tendency to spout off at the mouth, but it’s not a universal truth; sometimes the customer doesn’t have any idea what’s right, and it’s up to the owner to determine what’s best for the business, even when a customer may disagree.
There are many ways that facts become skewed and myths about cheap small businesses begin to raise their ugly heads, but untruths need to be curbed quickly. The longer that lies, even the nice-sounding ones, influence you, the less productive your business will be. Whenever you hear a report about franchise business of any size or cost, go to the source, not for hype, but for facts.
