Why people just don’t understand franchising.
The Merriam-Webster Definition of Entrepreneur:
one who organizes, manages, and assumes the risks of a business or enterprise
During a recent franchise conference, one of the panel speaker related a story in which he was at a meeting at a local university. He struck up a conversation with one of the university’s Business Professors who told him that a franchise owner is not an entrepreneur. It is shocking that those who are responsible for educating those who will be running our economy in the future do not understanding franchising. This is not isolated to our esteemed academia. We have spent many years walking the hallowed hall of Congress with the International Franchise Association (IFA) talking to Congressmen about franchising. In most case, not all, the Congressmen and their staff do not fully understand how a franchise works.
When someone thinks about who is an entrepreneur, they usually think of people like Bill Gates, Steve Jobs, Elon Musk or Mark Zuckerberg. They don’t think of their neighbor, Sally who owns the local Young Rembrandts franchise or Javier who owns the local Handyman Connection franchise. Why not?
Many people (educators and Congressmen, too) do not fully understand franchising and what it means to be a franchisee. There is a difference between an entrepreneur and someone who “runs” a business. One the biggest differences is who always gets a paycheck at the end of the week. The entrepreneur is worried about their people, while a manager is worried about the boss.
An entrepreneur is anyone who is willing to take the financial risk of starting and running a new business. So why do so many people dismiss the risk that a local franchisee has undertaken to bring jobs to their area. Because they just don’t understand. We have spoken to Congressmen who told us that the local owner of a franchise just works for the corporate office. That would mean the corporate office should be sending a weekly paycheck to the local owner. If it surprises you this does not happen, then you do not understand franchising.
For example, Bob has just opened a Liberty Tax Service in the strip center down the street. He may have invested nearly $75,000 to open that business. He has taken on a huge financial risk in hopes of future financial gain. He understands that unless this business is successful, he will not be getting a paycheck. A franchise owner will not receive any money for months and the corporate office is not sending a paycheck. Essentially, Bob has purchased a brand name and a proven system of success.
Let’s say Tammy has also open a tax preparation service called Tammy’s Taxes Now in a strip mall on the other side of town. She has also invested a large sum of money to open her business and is taking the same risk as Bob. Tammy will also forego a paycheck for several months. So why do people view Tammy as an entrepreneur and not Bob?
The only difference is that Bob has chosen a path that increases his likelihood of success. According to a FranNet survey, he will have a 42% higher chance for success than Tammy. Bob will have the opportunity to bring just as many jobs to the area as Tammy and can contribute to the local community as much as Tammy.
Bob and Tammy should both be celebrated for their entrepreneurial spirit and their willingness to take risks. So, next time you are in a local franchise, please thank the owner for their contribution to your community.