Accounting Franchise Fees

7 Common Myths About Franchising Debunked

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 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. Some people 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.

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 – you do not necessarily need to have that much in your bank account. There are multiple different ways you can finance a franchise. Examples include 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. Even with a proven business plan, to be successful you are still going to have trials along the way.

Opening a Franchise Business is Cheaper
Some people assume that opening a franchised business will be cheaper then opening up a traditional business since they will save on marketing costs. Unfortunately, even with a very well known franchise, you will still need to allocate funds for marketing. Additionally, royalties and fees can frequently offset these savings.

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 sky-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 franchise fee you pay or what the franchisor tells you.

About the Author

The Roni Deutch Tax Center is one of the nation’s hottest income tax franchise. For more information on owning a franchise visit, or check out Watch Me Franchise to see what it is really like to run a franchise business.

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