Becoming a franchisor is a decision that involves changing your very identity. When you decide to franchise, you not only need to understand the ins and outs of the franchising world but also understand your own role as a franchisor.
Do you think you are ready to become a franchisor? Take a look at the following myths about franchising and find out!
Myth: As a franchisor, you assume the role of working on your business, not in your business.
True! If you are franchising your business, your job is no longer running that business but finding others to open more franchised businesses.
Myth: All businesses are franchiseable.
False! A business must be profitable, have the ability to be replicated and have a documented system of operations that is easy to follow.
Myth: You only have to give a Franchise Disclosure Document (FDD) to someone once they become a franchisee.
False! As the franchisor, you must give the FDD to all prospective franchisees.
Myth: You will need between $75,000 and $150,000 in capital to become a franchisor.
True! Depending on the operation, you will need at least this much before franchising your business.
Myth: Royalties are paid to the franchisor for services such as training and marketing materials.
True! Franchisees are expected to pay the franchisor a royalty fee typically between 5 and 10 percent of gross revenues, usually on a monthly basis.
Myth: The Franchise Rule is published by the Federal Trade Commission.
True! The FTC Franchise Rule defines acts or practices that are unfair or deceptive in the franchise industry.
Myth: You must present an operations manual to each franchisee.
True! The operations manual is necessary to help the franchisee know how you want the business to be run.
Myth: A franchisor is liable for accidents that happened in a franchise location.
False! The franchisee is responsible for accidents at his/her location.
Myth: Federal laws have exclusive jurisdiction over franchisors.
False! State franchise laws provide close regulation of franchisors and supersedes or pre-empts federal law.