What Does Owning a Franchise Mean?
Owning a franchise means investing in a tried-and-true business model and recognized brand name. Those invested in a franchise receive the support and system needed to operate a successful business–although success isn’t always guaranteed.
In exchange for using the franchisor’s brand name, image and business model, the franchisee agrees to pay an initial fee and continued royalties to the parent company. These royalties, typically based on a percentage of weekly or monthly gross income, never end–even if the franchisee is losing money.
The expenses franchisees agree to pay the parent company may open the door for specific business support to help a new entrepreneur hit the ground running.
• Operating manuals
• Marketing advice
• Assistance in finding a location for the business
• Staffing assistance
• Nationwide advertising campaigns (depending on the size of the franchise)
• And more
Let’s say Shanice is interested in owning a coffee shop. But Shanice has never even worked in a coffee shop. To help her learn the business and get off the ground with a trusted brand name, she’s decided to buy a franchise of the (hypothetical) Steamin’ Beans, the “hottest” coffee hangout in the country.
After paying the $35,000 fee for a single unit (the actual average initial franchise fee), Shanice is off and running. Well, kind of.
First, she needs to build a building or improve an existing space. Of course, she’ll need to carefully follow the franchisor’s building requirements to get its final approval. With the franchisor’s help, she’ll then source the “steamin’ beans” and equipment. Next, she’ll need to find the right baristas to staff her new bistro, and a qualified, honest bookkeeper to keep all the company’s financials in order.
Shanice is off and running. Business is booming. She’s leveraging the trusted Steamin’ Beans brand name to get customers through the door and drive-thru. She’s relying on the Steamin’ Beans operating manuals and rules to ensure she offers the consistent product and service the brand’s fans have come to expect.
And she’s paying Steamin’ Beans ongoing royalties. And she will for the life of her business.
Of course, owning and operating a franchise isn’t all “pros,” with no “cons.” According to Forbes, the average franchise royalty fee on gross profit ranges from 5 to 6% of the volume. And it makes sense. Franchisors make much of their money by selling their business model to hopeful entrepreneurs.
The problem? Success isn’t guaranteed. And investors can get sucked into paying some hefty fees, even if their business isn’t exactly thriving. Most franchisor’s initial fees are non-refundable. That means you could miss out on thousands of dollars if things go south before you get the doors open. And that’s something most franchisors won’t tell you. Additionally, most franchisors won’t let on how profitable investing in the business may prove.
Plus, franchisors can terminate the agreement for almost countless reasons. Late on a royalty payment? It could be the end of your dream. Breach of the franchisor’s terms? That, too, could lead to the franchisor holding you in breach of the contract.
The point? Sometimes, as a franchisee, you work for the franchisor more than being your own boss. And didn’t you dream of running your own business to rid yourself of a “boss” in the first place?
Fortunately, there’s an alternative to the costly, restrictive traditional franchise. It’s not a franchise, per se, but it’s also not building a company from the ground up. It doesn’t require ongoing franchise royalties, but does provide much of the same business support you might expect as a franchisee.
Healthy YOU Vending is a unique business opportunity that provides all of the benefits of a traditional franchise without the painful “side effects.”
We never take a piece of hard-earned profits in the form of ongoing franchise royalties. We don’t tell our vending machine operators how to run their businesses but are there to help them along their journey. And expanding a Healthy YOU Vending business consists of placing more of our industry-leading vending machines at additional locations—instead of the costly and time-intensive process of expanding a traditional franchise.