5 Myths About Successful Franchisees

It’s important to dispel these falsehoods to paint a clearer picture of what it takes to be successful.

As a speaker and small-business coach, I get to talk to a lot of franchisees. I interview them before every live and virtual presentation so I can customize my message. I know the audience will be diverse, so I ask to speak with a variety of people achieving various levels of success. 

Struggling franchisees express their concerns and explain what’s lacking in their business. They compare their operation to those of high-level franchisees and point out the differences. Thriving franchisees share their perspectives, as well, explaining their reasons and tactics for success.

When you conduct of enough of these interviews, you start to see some patterns. You see what all top franchisees from many brands all have in common (which is the subject of my upcoming book.

You also identity what’s not true. There are many myths about franchise success. It’s important to dispel these falsehoods to paint a clearer picture of what it takes to be successful in franchising. Here are the most common ones.

Myth #1: Top franchisees have great locations

Without a doubt, a good location can help a business succeed. You’ve got to fish where the fish are. This is especially true for restaurants and retail. Convenient, well-exposed locations have an advantage. Sometimes this advantage is so good, it makes up for the poor business skills of the franchisee. But great locations aren’t always affordable. That top-ranked franchisee in your system may be pouring all profit into rent, and great locations may not be available in your territory. Geography can be tough to replicate. 

Truth: The top franchisees I meet do not all have great locations. In many cases, they acquired a franchise from a struggling owner who blamed their location for poor performance and sold it cheap. Top franchisees turn these locations around and make them winners. When they don’t have as much foot traffic, street exposure or even the ideal demographic, they compensate with better management, great customer service and consistent marketing. And with cheaper rent, they often make a lot more money with less-than-ideal locations. Every franchise system has turnaround stories of “bad locations.” Unless you’re running a great operation, you really can’t accurately assess your location. Geography matters, but not as much as other factors that are more within your control.

Myth #2: Top franchisees are workaholics

To get those kinds of results, they must be living in their business. Day and night. Open to close. Saving money by doing as much as they can themselves. Success is built with sweat. 

Truth: Hard work isn’t the secret to success. It’s the prerequisite. Plenty of franchisees are putting in the hours and have little to show for it. The top franchisees I meet work hard, but more importantly, they work smart. Their hours aren’t spent running the business as they are growing the business. They invest time turning employees into leaders. The create systems that don’t rely on their direct personal involvement. If there’s a task they can train someone else to perform, they do. They understand that being busy isn’t the same thing as being productive. Their time is best spent on the big picture. Not getting caught up in the minutiae affords them the ability to strategize and expand. It also allows them to maintain a balanced life with time for family, fun and travel. Or if they choose, more work. Their business doesn’t run their life. It supports it.

Myth #3: Top franchisees are more educated

They’ve gone to college. They have MBAs. The schooling they got taught them how to run a business.

Truth: Many franchisees have college degrees. Many do not. I’ve not seen a correlation between the successful franchisees and their formal education. In fact, many legends in the franchise world never went to college. Jersey Mike’s founder and CEO Peter Cancro bought his first sub shop while still in high school. My former franchisor Tariq Farid from Edible Arrangements also started as a teen running a flower shop. Wendy’s founder Dave Thomas didn’t even get his GED until he was 61. I’ve seen lawyers and engineers drive their franchises into the ground. I’ve seen young, aspiring entrepreneurs embrace the systems their franchisor taught them and thrive. I went to college and will be sending my kids. It’s great for having a better understanding of our world. It’s not necessarily the most important asset for running a franchise business. To succeed in franchising, what you’ve learned in school is less important than what you’re still willing to learn from your franchisor, your employees and your customers. 

Myth #4: Top franchisees have more business experience

Many people come to franchising from different industries. I speak to a lot of people with a corporate background. They’ve had important jobs for many years. All of that experience in a high-pressure, fast-paced environment should make it much easier to run their own business.

Truth: Absolutely not true. In fact, many franchisees struggle because of their past experience. One common trait among the top franchisees I’ve interviewed is a willingness to stick to the system developed by the franchisor. They’re not interested in innovating something new or pulling in ideas they learned elsewhere. They’ve paid for a proven model. They focus on excellent execution. Franchisees who come with ideas that have worked somewhere else often struggle to let go of what they know and trust the system they’ve invested in. Another issue is that having a job — even an important one — is not the same as owning your own business. There’s less structure and stability. There’s less personal feedback and accountability. There’s no guaranteed paycheck, and it’s harder to walk away. Certainly, there are plenty of practical skills that will translate, such as marketing, bookkeeping and employee management. Knowledge in these areas can be really helpful provided you’re still able to embrace your franchisor’s proven systems.

Myth #5: Top franchisees love the business

To operate at that level, they must be passionate about their business. They must love frozen yogurt. They get excited about senior homecare. They live to clean their customers’ carpets. “Find something you love to do and you’ll never work a day in your life.”

Truth: In writing my book, I asked every successful franchisee I interviewed if they’re passionate about their business. Their answers varied. Some really do get excited about the specific product or service they provide. Others enjoy interacting with customers. Some have fun crunching numbers. I spent 10 years as a franchisee with Edible Arrangements. I didn’t especially love fruit baskets. I did enjoy helping people celebrate special occasions. It seems that successful franchisees don’t necessarily love the business, but they all love something about it. 

It’s critical to know the truth about top franchisees if you want to replicate their success. They’re really not extraordinary people. Nor do they have extraordinary advantages. They’re normal people executing extraordinary well. That truth makes franchise success achievable for a lot more people. 

5 Ways to Find the Most Profitable Franchises for You

The most profitable franchises for your situation might not be the most profitable for someone else.

Entrepreneur takes great pride in its Franchise 500 rankings. We’ve ranked the best franchises in the U.S. for more than 40 years, focusing on five primary categories: costs and fees, support, size and growth, brand strength and financial strength and stability. You can read here how Dunkin’ took home top honors in 2020 and check out our top 20 franchises, but that doesn’t mean investing in a Dunkin’ — or any of the other top franchises — is the most profitable choice for you. siraanamwong | Getty Images

In fact, it’s nearly impossible for any ranking system to guarantee a return on your investment. There are simply too many variables to take into account for each individual case. However, you can better position yourself by doing research ahead of time and defining your goals and limitations before diving in financially. Although this is not a holistic list, answering these five questions can help give you a better sense of which types of franchises will be most profitable for you.

1. How much can I afford to spend on my franchise’s initial investment?

Last year, Bankrate reported that the average American has $8,863 tucked away in savings at a bank or credit union. It’s simply not practical for most people to invest in our top hotel franchise, a Hampton by Hilton, which costs more than $7 million — at minimum. And although you might be able to buy a burger for a buck at a fast-food stop, the startup cost for a McDonald’s franchise will run you seven figures.

The first step in finding the most profitable business for you is deciding which franchise opportunities you can actually buy. SPONSORED CONTENT:

8 Tips to Help You Grow Your Business on LinkedInBy: LinkedIn Marketing Solutions

Related: 24 Top-Ranked, Affordable Franchises You Can Buy for $25,000 or Less

If your budget is limited, some franchisors offer multiple investment options. For example, the No. 34 franchise on our list, Jan-Pro Franchising Int’l. Inc., features unit franchises and executive or master franchises. Unit franchisees typically deal directly with the consumer, while executive franchisees organize and oversee a local group of unit franchisees. Unit franchisees require less experience and initial investment, but it’s possible that an executive franchisee might make more over the long run.

2. How profitable have other franchisees been in similar circumstances?

Want to get a clearer sense of whether an executive franchisee or unit franchisee is more profitable in your area? Want to know whether a commercial cleaning franchise like Jan-Pro even makes sense for you, or whether a home-based travel agent network like Cruise Planners makes more sense? Go directly to the source. 

Local franchisees can fill in many of the gaps that online resources like our Franchise 500 simply can’t. They know better than anyone the challenges and opportunities someone else might have by starting a similar franchise would face.

In every walk of business, experience and mentorship are incredibly valuable assets. In fact, the strategy of franchising taps into these assets more than other businesses by allowing new business owners to rely upon the history, brand reputation and resources of an established company’s business model.

If you’re serious about investing in a franchise, you should take the time to talk to others who can teach you about the business and answer questions you might not even know to ask.

3. How much can I expect my franchise to earn in sales?

If you think other franchisees will answer, this could be a great question to ask them. If you want to invest in a fast-food franchise, you can check QSR’s ranking of the top 50 quick-service restaurants by gross sales. In general, however, finding specific sales or profitability numbers can be difficult. There’s no profit margin without sales or income, so getting a sense of these things will be essential to understanding your franchise’s potential profitability.

4. How much money will I have to give back to my franchisor in royalty fees?

In addition to an initial franchise fee and startup costs, you will likely be required to pay two other fees. The first of these is a marketing fee, which the SBA explains as such: “When you own a franchise, one of the things you’re hoping to capitalize on is the brand. Franchisors spend thousands of dollars every year to advertise their brand. As a franchisee, you’ll be asked to do your part, too, by way of a monthly marketing fee. Franchise marketing fees are usually based on your monthly revenue.”

The second fee is a royalty fee. “Franchise royalties are usually collected by your franchisor on a monthly basis,” explains the same SBA post. “Like marketing fees, these fees are based on a percentage of your revenue.”

However, this isn’t always the case. For example, Anytime Fitness requires a marketing fee of $449 to $699 per month and an ad royalty fee of $300 to $600 per month. Entrepreneur can help you determine the marketing and royalty fees for the businesses in the Franchise 500, which are broken down on the respective franchise pages.

Try to calculate other costs that come along with investing in a franchise. How many employees will you need to hire? Can you run the franchise from home, or will you need to pay for a physical space? Some of these questions you might be able to answer on your own, and some you might be able to learn from other franchisees or the franchisor. 

5. How much time do I plan to invest in the franchise?

Investing in a franchise doesn’t mean you own it forever. Typically, you must agree to a term of agreement, which “spells out the length of time that your franchise agreement is valid — usually anywhere from five to 20 years.”

If you remain in good standing, you will most likely be able to renew your agreement for a percentage of the then-current franchise fee. However, when calculating the most profitable franchises for you, it’s important to consider how much you can expect to earn over the course of that term of agreement. Do you plan to invest in a franchise for five years? 10? 20?

Do you even have time to make a franchise your full-time focus, or would you prefer an option that you can use as a side hustle?

The most profitable franchises for you might not be the best for someone else.

If any franchise could really be profitable all of the time — if there were such a thing as “the most profitable franchise” — then investing would be easy. But, when considering how much money you could make on a certain venture, it’s essential to take into account dozens of factors.

Answering questions about sales and startup costs, royalty fees and time investments can help give you a clearer sense of what will work for you and what won’t. Similarly, using a variety of trusted sources will help fill in the blanks and point you in the right direction. At the end of the day, becoming a franchisee is a big investment, and as investor Warren Buffett once said, “never invest in a business you cannot understand.”

Tired Of The Same Old Same Old? Try A Franchise!

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Are you cruising along in a job that you can do with your eyes closed, maybe even with your hands tied behind your back? Everything is humming, and your industry seems solid.  Then, bam! Something happens that shatters all your old assumptions and you start to wonder, what are my options? That’s what happened to Dennis Clouser, of Tampa, Fla., who, as a mechanical engineer, had spent 30 years in the electrical connector industry. His last job with the billion-dollar company ITT Corp. ended abruptly after his division’s largest customer, a military contractor, pulled its business once the federal government imposed massive across-the board cuts as part of “deficit reduction sequestration” in early 2013. At the age of 51, Clouser received a six-month severance package, and the company made classes available to him to help him figure out his next stage. One of those classes introduced him to the option of a franchise. Before long, Clouser lined up another job doing exactly what he had been doing for 30 years. But doubts soon started creeping into his mind. “I thought, is this it?” Clouser recounted. “The hell with it. I’ll take a chance on myself for once instead of doing what I’ve been doing until I die. Maybe I can do something different.” He had a couple of friends with franchises, and he thought, well, if they can do it, maybe he could, too. With the help of a franchise coach, he started doing his research. “101 Mobility really grabbed me,” he said, referring to the franchise that sells mobility equipment, such as stair lifts, auto lifts and ramps to help people with disabilities stay in their homes. “I could help people instead of making bombs to blow them up.” Clousen felt a personal connection to the mission of helping people deal with their mobility issues around the house since two members of his family had suffered amputations that resulted from complications from Diabetes. While Clausen was confident about his mechanical abilities — “I can put anything together” —when it came to the other aspects of running a business, from bookkeeping to managing payroll and benefits, he felt less sure of himself. That’s where the franchise company’s support really came in handy. “101 is fanatical about opening steps,” he said. “There are biweekly meetings with people in corporate” where they discuss everything from finding a location, negotiating a lease to paying taxes. “They manage you every step of the way,” he said. “I wouldn’t have been able to open without learning what I learned from them.” As part of the preparation process, he talked to franchisees, some of whom were more helpful than others, but he finds the idea of sharing one’s experiences one of the most compelling aspects of having a franchise. For example, he particularly likes the franchise’s new program, “Talk to a Franchise,” where he, now as an existing franchisee, talks to three or four potential franchisees on the phone, and they get the opportunity to ask him whatever questions come to mind. “I’m really blunt with them,” he said. For starters, he tells them starting up a franchise is a lot of work. After two years with his new business, while he acknowledged making some mistakes along the way, he would definitely do it again. The difference is now he’s got total control of his life. And while he knows he may be working until 9 p.m. doing an evaluation of someone’s home, if the water sparkles particularly bright one sunny day, and an empty parking space beckons from St. Pete’s beach, he knows he can take an hour for a swim if he feels like it. Not a bad living. Not bad at all.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589. 

Want A Business With A Proven System? Shop For A Good Franchise

The attraction of a good franchise is its proven system for making money. You plunk down your money, and the franchisor shares the secrets of the trade: follow these procedures and you, too, can have a successful business and earn a good living.

The tricky part is finding a franchise whose system is truly proven. This is why buying into a new franchise can be risky since they may still be working the kinks out of the system. After all, the franchise company learns more about the business model from the process of expansion. By the time, they’ve got a dozen or more franchises that have been operating successfully for at least a few years, the franchise has a proven track record. But not before then. And because we would never recommend buying a franchise where you didn’t have the opportunity to interview plenty of existing franchisees, this process tends to eliminate those systems that haven’t yet passed the test of time.

3 Simple Questions To Help You Separate The Winners From The Losers

How long has the franchisor been in business?

There are actually two parts of this question. First, when did the franchisor first start the business? They may have operated for years as a single unit operation. Or they may have originally started off with the idea of franchising. How long have they been franchising? What is their franchisee success rate?

How many outlets are there?

If the operation is mainly centered in the region around their headquarters, and you’re in a different part of the country, you may not want to jump into this without a lot more investigation. Learn about their process of expansion. If most of the expansion has occurred in the past year, their system may not be fully tested.

Are there regional differences in the system?

A good franchise is always experimenting. They may find some products or services are more popular in some places than others. For example, McDonald’s sells the McRib sandwich more often in the South than up North. Do you see evidence of creative flexibility? Once you have a solid assessment of how well the franchisor’s system actually works, you can move forward with your next set of questions. First and foremost: Can you follow this system? Assess yourself honestly. Even though it works for others there may be a multitude of reasons why it may not work for you. If this is the case, walk the other way. If, on the other hand, you like the system and it is a proven money-maker, you also need to know if you think you can you work well with the franchisor’s support team. Whatever you do, as you go through your due diligence, don’t let wishful thinking and romantic visions of a particular business bias your thinking. In other words, don’t fall in love with a franchise before you learn everything there is to know about it.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.