Top 5 Franchise Myths BUSTED!

Thinking about franchising but feeling confused by all the information out there? In this episode of the Franchise Freedom Podcast, Giuseppe Grammatico debunks the top 5 franchise myths he hears all the time. He covers everything from franchise availability and ownership to investment levels and multi-unit requirements. Get the real scoop on franchising and discover if it's the right path for you.

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Transcript

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There are businesses all in that could be under a hundred thousand dollars let alone, what most people think of fast food and millions of dollars in investment. So definitely not for the rich. There are ways to fund these businesses as well without having to come out of pocket. For the full amount. my biggest recommendation is going and looking at the item 19, which is their financial representation. They all read a little bit differently, but also talking to franchisees and asking them, ideally what they can make maybe as a part time owner or as a full time owner. Welcome to the Franchise Freedom Podcast, where you can escape the corporate trap through franchise ownership. Here's your host, Giuseppe Grammatico, The Franchise Guide. Welcome to the Franchise Freedom Podcast. I'm your host Giuseppe Grammatico, your franchise guide. Thanks for joining us today. Today is one of my favorite types of episodes because we are going to bust some myths today. So we're going to bust the top five franchise myths that I get on a daily basis. And there are plenty more than five, but we're going to go with the most recent five. And then we'll just continue with the series down the road with some additional installments of myths that we get on a daily basis. Which is totally fine. This is just really to explain where this is coming from and just provide a little bit of clarity. So excited to to bust the myths today. So number one in the five parts or the five franchise myths are franchises have to be offered in all States. So what happens is a franchise. Franchise or right, they really are deciding how they want to go about expanding. So once a business becomes a a franchise or a franchise they'll get the FDD created the op policies, procedures, operating manual and procedures and things like that. They'll decide how they want to expand. They'll decide if they want to have an in house sales force. To help grow the man the brand work with franchise coaches, consultants and brokers. If they want to stay regional, there are brands that maybe we'll say in the Northeast or along the East coast or the West coast to try out the brand and prove the markets and the business models before they expand across the country. So just because there is a franchise doesn't mean it's going to be available in all 50 states. The other aspect is some of the more newer brands, the emerging brands, what we call they may not file in the 13 registration states that exist in the U. S. Registration states simply put, there are additional requirements in the FDD certain language in, in areas that they have attached there. And some brands that are more emerging may wait a little bit longer to get registered in their state. So not a negative in any way so they may start off in 37 states. Before opening up because they'll need that extra data, that financial data that each state will require. If you don't see it, it could just be local strategy in your state and hopefully down the road. You can always contact the franchise or directly, and they'll, talk to you about their future expansions. Another one I get, and I talked about this before is that franchise owners, franchisees do not own a hundred percent of their business, and that is simply not true, a franchise owner. We'll set up their own legal entity. Typically we see an LLC an S corporation, even a C corporation. Those are the top three legal entities and you own the business. You run the business, you own your business. So it may be, a nail salon. Functioning here in central New Jersey, and that's great. You don't own the franchisor's business, you own your business. So you get the system, you follow the system, you get the support, you pay that ongoing typical royalty, which is a percentage. Some brands do a flat fee, but you own 100 percent of that business. All day long. There's no giving back to the franchise or that they own it. This is a conversation that comes up quite, quite a bit. And I'm not sure if there's some information out there that says it says otherwise, but it has come up. So I wanted to address it. It is your business. You were able to grow the business. You were able to sell the business. If there's a 10 year agreement, you are able to sell the business prior to 10 years. You don't have to be in the brand, the franchise itself for 10 years, just contact the franchise or read your FDD as far as best ways to go out and sell that business so that everyone's on the same page. All franchisees can be run semi absentee as long as they have the money. That is actually a myth as well. I talked about this in a previous episode, the franchise or. We'll have, their franchise avatar, who is their ideal candidate, their ideal person for this business. The person that has the sales background, the person that has a certain financials, the person that has. experience because there are a lot of employees involved in the business. So each franchise has different requirements and part of those requirements are many cases that you need to be full time the first six months to up to a year to get the business up and running, learn the business before, removing yourself from the business. And in other cases. You are able to run the business part time. So a part of the value that I bring to the table is that when we're looking at brands and putting together what the ideal business looks like, via the business characteristics we talked about in one of the previous episodes is that let's go back and say, okay, what does this ideal business look like if you cannot leave your job? initially, then we're not going to look at brands that need full time involvement from the get go, obviously. So we take a look at that. We know what the offerings or the requirements I should say for the brands are. And we spent a lot of time there. Number four franchises are only for the rich. So this one is based off of a lot of people think that it is all fast food. Big buildings, equipment, dozens and dozens of employees, standalone buildings and things like that. They're definitely franchises that, that fall in that space. And there are plenty of other brands believe it or not, that could be run from home. Your customers may not be coming to your home, but it may be a coaching business where you physically get in the car that you probably already have and use a phone you probably already have as well as a laptop and go to a business and offer coaching. You may offer executive recruiting for a business or even expense reduction keeping the investment. There are businesses all in that could be under a hundred thousand dollars let alone, what most people think of fast food and millions of dollars in investment. So definitely not for the rich. When each franchisor gives you their FDD, they'll give you an item seven, which is an itemized list of kind of the investment from a low to high end, breaking it down from marketing working capital that you should have to travel to training, and the list goes on. So you'll get to take a look at that list, how much, how many staff will you have? Will you have a general manager so you can put together your own pro forma? But it's definitely not for the rich. And even in the case of a hundred thousand, which I, I. Completely understand is a lot of money. It's a lot of money for a lot of people including myself. There are different ways of funding this, and there are ways of using retirement assets or even an SBA. So if you don't want to use all of your money upfront, maybe put up 20, 30%. There are ways to fund these businesses as well without having to come out of pocket. For the full amount. So not just for the rich. I always say if uncertain anyone I work with, I refer them to a funding company to do a complete analysis. It's completely free. They'll check the credit rating. They'll check your current income. If you're going to be keeping your job. liquidity net worth, they're going to take a look at the big picture and then figure out what are the funding options. And then once you figure out the funding options like the SBA, how large of a loan can I qualify for? That it's a free service. You only pay if you move forward. Usually for the for the companies we work with, if we decide to move forward something I encourage everyone, getting pre approved when you're buying a home, you want to see what your buying power is, how, how large of a loan I can get, and then figure out what your ideal price range is. Yeah. And another one, and this is a, an interesting one that has come up a little bit more recently is that in order to make money with the franchise, I have to buy more than one location and, or more than one territory. So taking a step back, most brands you don't have to buy more than one. You're able to buy a single location to start. You're able to buy one territory to start. There are, a handful of brands that do require a little bit bigger of a commitment where maybe two or more, two more locations or territories to make money. Everyone's has different goals and opinions on why they're doing this. So my biggest recommendation is going and looking at the item 19, which is their financial representation. They all read a little bit differently, but also talking to franchisees and asking them, ideally what they can make maybe as a part time owner or as a full time owner. what they can make per territory per location. So we'll just use a basic example. If the average territory across the board is making a hundred thousand in the territory then, and your goal is to make 300, 000 do you look at two or three territories? Once you're looking at more territories, you have to look at what is the total investment if I'm buying more than one while in a service based business, If you buy a second territory, you're paying a discounted franchise fee. So your investment won't double but on a physical location your investment is pretty much going to be similar from location Get maybe a discount on the franchise fee, or maybe there's negotiation if you're dealing with the same landlord or property manager. But really, looking at and saying, okay, maybe you're okay with that amount of money or that franchise or offers multiple revenue streams. There are brands that offer one thing, one service offering, and there are others that will utilize their services to be able to apply throughout the home, whether it be a coatings business that's able to restore your siding, but they're also able to restore kitchen cabinets as well as your roof. So there are different revenue streams. So what does that mean for the franchisee? They're able to upsell their existing customers by coming back into the home saying you had a great experience with the siding. Why not have this take care of your roofing? So these are, some some great things to think about. And ultimately, so you may need to be by more than one territory location, but do the due diligence, look at the item 19 and speak with franchise owners to get the complete picture and figuring out exactly what that overall investment is. In some cases, you'd be surprised. You may be able to pick up two or three territories of a service based brand and still be less than a single brick and mortar location. So make sure you compare apples to apples and gather all that info. Guys that's all the time we have for today. Thanks for joining us. Top five franchise myths that I've been receiving recently. I'll definitely be adding to these as I have conversations on a daily basis. Interested in your comments any additional questions and looking forward to you joining us on the next show, take care, everyone. If you want to learn how to make the transition from corporate to owning your franchise, join Giuseppe on the next episode. You can also follow on all social media platforms and achieve financial and time freedom today.