If 90% of startup businesses are reported to fail before their fifth anniversary, but that is NOT a statistic that’s owned in franchising, why do some truly smart people think that franchising is for dummies? Stick around so I can BUST. THAT. MYTH.
There’s this misconception about what a franchise is, because as consumers, we mostly think about the sub shops and retail locations. Really smart, educated executives, CEOs from Corporate America don’t want to own those kinds of businesses. And I totally get it! This is why The Daly Coach exists: to help educate candidates who are thinking about franchising, to widen their search, to cast a wider net, to be able to look at opportunities that you might not otherwise have even known existed as franchise businesses.
So let’s get into the value proposition of a franchise compared to an entrepreneur:
When you say yes to a franchise, you pay a one time fee called a “franchise fee.” That fee opens the gate and buys you instant access to a business plan, proven marketing, technology, support, training… You don’t even have to be an expert or have experience in that type of business in order to start that business and be successful. You come in as the executive with management like leadership management, operational and sales skills, and I can match those skills to so many different types of businesses. Brands that you do not need have to have experience in order to go on to build a $100,000,000 company. If the business has that potential for scale in an entrepreneurial setting, the entrepreneur has to stop and CREATE that toolbox.
So the franchisee has to pay a fee. But that fee, again, buys you instant access so that from day one, you can start moving toward profitability. You can start moving your business toward profitability, compared to the entrepreneur who might spend three to five years just trying to figure out exactly who that customer is and how to cost effectively reach that customer and how many customers you’re going to need in order to build a positively cash flowing business.
Now, the reason that 90% of small businesses fail before their fifth anniversary is because 90% OF THE 90% of businesses that fail, fail simply because entrepreneurs run out of money before they really figure out how to make money. They’re running out of money because they’re making assumptions. They have to create the path. They have to blaze that trail. In a franchise, you’re paying that one time fee that buys you knowledge of a proven path. It’s the difference between the pioneer blazing the trail through the woods and the franchise owner paying the fee and then walking on that path that’s already been blazed through the woods. So the entrepreneur is stopping and creating that toolbox as they go, hopefully not running out of money on the way to building this positively cash flowing business while the franchisee starts out from day one moving toward profitability.
In that same three to five years that that entrepreneur is starting a business, I can take an executive who has a goal of scaling a business to three to five locations. And in that same three to five years, he or she can open three to five locations.
90% of millionaires own their own business. They own their own business so that they can control the income, they can enjoy the tax advantages, and they can build that equity that later has value that they can sell. The entrepreneur can absolutely build wealth, but the question is, will he or she run out of money on the path to that dream? And will that business ever really reach that goal statistically for the average person? Sadly, the answer is probably no.
To summarize, franchisees have the advantage of coming in with a proven plan from day one. That proven plan allows them to leverage their time and money through systems, through technology, through people, to be able to scale a business in a much shorter amount of time. Any business, whether it’s an entrepreneurial business or a franchise business, the wealth is created through the scale. If somebody can offer you a proven business plan so that from day one, your time and your money can move you toward profitability and scale, why then is franchising for dummies?
I say truly smart investors look at franchise opportunities. If you watched the video above and you’re wondering if YOU might be a dummy :-), please leave a comment below or reach out to me directly!