From A to Franchisee: The Podcast for Smarter Franchise Buying

Debunking Franchise Myths

• Franchise Business Review • Season 1 • Episode 3

Share episode

Send us a text

In this enlightening episode, we dive into the world of franchising with Katie Ingalls, a client success manager at Franchise Business Review. Together, we unravel common myths surrounding franchising, exploring whether it's truly an industry or a business model. Discover the economic impact of franchising, the misconceptions about passive income, and the importance of local ownership. Join us as we debunk myths and shed light on the franchise experience, making it less mysterious and more accessible to all. Tune in for an engaging conversation that challenges perceptions and offers fresh insights into the franchise community.

Guest: Katie Ingalls, Client Success Manager at Franchise Business Review

Host: Michelle Rowan, President and COO of Franchise Business Review

Resources for S1E3: Debunking Franchise Myths:

Connect with Us:

Visit FranchiseBusinessReview.com
Follow us on Instagram, @franchisebusinessreview
Subscribe to our newsletter
Check us out on YouTube, @FranchiseBusinessReview
Connect with us on LinkedIn


Michelle Rowan (00:01.378)
Welcome to the podcast, Katie. Yay.

Katie Ingalls (00:04.513)
Thank you for having me.

Michelle Rowan (00:06.954)
Katie Ingalls is a client success manager here at Franchise Business Review. She takes care of our clients. She oversees survey projects from planning to execution. We run a lot of projects here at Franchise Business Review and Katie does a lot behind the scenes to keep everything moving along. So she also connects with our clients, which works out well because she is so delightful and everyone loves her. And I hear she's got a killer jump shot, but I have not seen it in action yet.

Katie Ingalls (00:36.631)
Not yet.

Michelle Rowan (00:36.688)
Not yet. So I invited Katie to join us today because we're going to talk about some myths in franchising and she's one of the newer team members so I thought it would be great to have someone that is newer to franchising talk about these myths with us, with me, because I'm an old lady and I've been in franchising forever so you'll get both perspectives here. So thank you Katie for joining today it's gonna be a great conversation.

Katie Ingalls (01:03.287)
Can't wait.

Michelle Rowan (01:04.622)
All right, so I know that franchising is actually kind of mysterious and it's actually a very large part of business in the United States. It fuels our economy. Franchises account for 3 % of our country's total GDP and that's according to Statista, hope I say that correctly. According to them, the economic output of the US franchise industry is valued at $860 billion.

That's a lot of money and still people don't know a lot about franchising. So Katie, did you know that franchising was such a big deal before you joined us here at FBR?

Katie Ingalls (01:45.505)
I actually didn't. I didn't have a lot of knowledge of what franchising was coming in and I'm learning still every day. Yeah.

Michelle Rowan (01:52.13)
I love it. I love it. Hopefully you love it as much as I do 20 years in, but I'm still learning lots about it. And I took this particular topic and put it out to my network on LinkedIn. And it's a, it got a lot of comments. It's a popular topic. There's a lot of myths in franchising. So my question to people was what myths have they heard in franchising? So they helped us put this list together. Over 50 comments. It was like 5,000 impressions. So this is a hot topic. We're gonna dispel some of these myths today.

Tell me a little bit, Katie, before we jump into the conversation, what were you doing before FBR and how did you come to find us?

Katie Ingalls (02:31.191)
Yeah, I was in property management in San Diego and I was just looking for something new and exciting and I fell into FBR so happily. It was just a happy accident and I couldn't imagine anything else now.

Michelle Rowan (02:43.48)
Well, we are so glad you found us. So thank you for joining our team. Okay, here we go. Let's start. Katie, what's the first myth that we captured?

Katie Ingalls (02:52.747)
Yeah, so the first one is franchising is an industry, is it not?

Michelle Rowan (02:56.79)
So this is a very, very hot topic. People are divided over this. So I will start with one of the comments that was actually made on LinkedIn. It is not an industry. the person that commented talked about an industry is, it's not an industry, it's a business model. I think that's the best place to start at it. So it's true that it's a myth. It's a business model. It's a way of expanding and growing a brand. An industry is more about the economic

output of a particular industry. I also too want to like flag it socially. I will use the term franchise industry a lot. And I think that's because we're such a close knit. If you're active in franchising, it's a close knit community. And I feel like I need to be better about using franchise community instead of industry. But franchising crosses all kinds of sectors, which would be considered industries like food, like retail and services. So myth number one.

is franchises and industry.

Katie Ingalls (03:59.049)
makes so much sense the way that you just described that.

Michelle Rowan (04:02.242)
We might have people come at us for that one or we'll get some comments on that one. All right, let's hear myth number two.

Katie Ingalls (04:09.247)
Alright, number two, franchising is passive income.

Michelle Rowan (04:14.308)
this one is a good one. Absentee ownership. What else do they say? Passive investment. It's a total myth. So I think that...

you will find there are very large multi-unit owners. So they might own several brands, they might own several locations of the same brand, and they've built up an organization that they might be more removed from. But I really feel like you should be leery of a person that is telling you that you can buy into a franchise system and not be active in the business. I just, feel like that's gonna set them up for failure.

I own a business that's not a franchise and I think anything that you're starting, you've got to put your full energy and attention on. Eventually, maybe you could get to a place where you're not active in the business, but I still, I just, it makes me uncomfortable if people are marketing an opportunity as you could be an absentee model. So I'm going to say that's a dangerous myth out there.

Katie Ingalls (05:17.143)
Totally, and that segues very nicely into our next myth, which is you don't need a business plan.

Michelle Rowan (05:23.438)
So I think this has gotten better over the last 20 years, but I think franchise owners are doing a much better job of making sure their franchise owners that they bring on board have much better business acumen now. So they understand how to read a financial statement, a profit and loss, look every month. They're getting better at the financial coaching of franchise owners, but

I would be nervous if I was going to join a franchise brand and the team that was having me sign this five, 10 year agreement with them didn't ask me to see my business plan. That would make me nervous that they don't want to see how realistic I'm being, when I think I'm going to break even, how profitable I can be. They have access to all these other franchise owners in their system that have done it before. They should have an idea of what that looks like, but they should still have the franchise

put that work in and do a business plan.

Katie Ingalls (06:21.749)
I do think that there is some idea that it will be given to you by the franchisors.

Michelle Rowan (06:26.538)
Yeah, that's a great point is that they'll probably provide me the business plan and they'll give you a lot of structure, but I think you still need to be the one that kind of sits down and thinks about even from the beginning, what's your exit strategy and knowing that really puts your business plan on track to make sure you hit that target. Yeah.

Katie Ingalls (06:44.375)
totally. Alright so our myth number four, let's get into it. It's a pyramid scheme, a get rich quick scheme.

Michelle Rowan (06:50.99)
Eek! I hope this is a myth. I think, so what we try to do here at FBR is really talk about realistic expectations. So I think we're lucky here in our organization that we get to work with franchisors who teams really care. They are committed to that success of their franchise owners.

I feel like there could be some out there that don't have the best intentions and are built, I'll say, on a house of cards. That they're focused on getting that franchise fee that first time when someone joins the brand, they get a chunk of cash.

But that shouldn't be how a good franchise model is built. It's built on the royalties, the monthly recurring fees you get for the products and services that your franchise owners are purchasing from you or selling to their franchise owners. You're getting a percentage of that for all the support, the marketing, the brand recognition that you bring them. So there could be some, I don't know if it's technically a pyramid scheme, but there could be some shady behavior out there. But I don't think...

There's many get rich quick schemes out there. I'm gonna cross my fingers on that one, Katie.

Katie Ingalls (08:05.975)
Totally, I agree with you. Let's get into myth number five. If you just follow the system, you will be successful.

Michelle Rowan (08:13.634)
So I love this myth and I think I'm gonna start with.

The one piece of advice, I'll usually ask people, know, if you've been a franchise owner, if you've been in franchising, what's one piece of advice you would give to someone considering a franchise? One of my top is always follow the system because you're buying into something that is supposed to be a proven model no matter where you put this business, what type of community it's in. It should be successful if they have built the processes and the structure around that.

I think this myth comes into play where you can't just follow the system. So don't go rogue, don't try your own thing, but I think there's more to running your business and being successful than just following the system. Does that make sense?

Katie Ingalls (09:00.319)
Absolutely, I think that there might be a little bit of confusion between follow the system and making sure that you also have your business plan in place and just being sure that you are taking from both.

Michelle Rowan (09:10.264)
Yes.

Yeah, or even too. think it's common for franchise owners to think, my franchisor is going to bring me all of my customers and they are going to support me in growing my business. And I think that's a myth in that you have to be really involved in your local community and you have to think about the service that you provide people so that they'll keep coming back to your business. So you can't just think that the franchise or system is going to bring you business or success. I think there's still

a little elbow grease you gotta to put into the to the work that's being done.

Katie Ingalls (09:47.969)
That does seem to be kind of an overarching theme with a lot of these myths is that it's simple, quick, easy, not a lot of work on your end. And you just have to know that when you're getting into it, you have to bring some entrepreneurial spirit with you. Totally. Okay, cool. So let's get into myth number six, which is franchises are corporate owned.

Michelle Rowan (10:02.796)
Yes, yes, totally agree. Yeah.

Michelle Rowan (10:11.224)
think that's a common one. I think even if we look at, there's a lot of legislation that has happened or discussion in the government around this joint employer idea. so joint employer was really focused on if a franchise, if something happens at a franchise location and an employee sues.

Katie Ingalls (10:19.403)
Mmm.

Michelle Rowan (10:32.674)
Can the franchisor be held responsible for that damage or can that person go after the franchise? This is not as big of a concern as it used to be. There's very clear lines at the franchisor, the corporate entity, doesn't hire or manage the employees of their franchisees. So that's number one. There is though, there's a lot of franchise systems that will have corporate locations. So while the franchise is a structure of that is a franchise,

Katie Ingalls (10:59.414)
Right.

Michelle Rowan (11:02.688)
that's purchased that agreement to run the business, they might also run corporate locations because that's where they'll do their testing, that's where they'll try out their marketing things, or just make sure that they have skin in the game, I guess I would say, or understand that what's happening in those locations with consumers. But I think it's split on franchisors that agree it's important to have corporate locations, or they'll say, if you're a franchisor, your business

is supporting franchisees not running the business of the product or service. So I think that's going to be a split too. They're not corporate owned, but some franchises have corporate locations.

Katie Ingalls (11:43.883)
think that it's a good thing if they have corporate locations. I feel like I would want them to understand what I'm going through as a franchisee as well. Cool.

Michelle Rowan (11:46.307)
Yeah.

Michelle Rowan (11:52.482)
Well, and I think what's interesting to think about that is from what I've seen in franchising, franchisees usually outperform corporate locations. So it's interesting and maybe it's because they have skin in the game or they just really know how to operate that business. But I think it's fine either way. Just know what that strategy is and know why you're doing it if you have those corporate locations.

Katie Ingalls (12:02.965)
Yeah.

Katie Ingalls (12:16.343)
Very cool. Okay, and myth number seven, franchises aren't locally owned and operated.

Michelle Rowan (12:23.138)
This is a big myth. So sure, there are franchise groups that own tons of locations. The largest franchisee in the United States is actually bigger than most franchisors themselves. But the majority of franchise locations are owned by someone that's in your community. And so I think what's really interesting to think about, and I think there's a lot of work that everybody that's involved in franchising needs to do to talk with people in their community and help educate them.

on that because I will see on Facebook, on LinkedIn, on Instagram, it's very easy for people to start bashing a brand and say, a big box brand and things like that. And I will just kind of pipe in and say, you know, that's actually a location that's run by a local business person that is someone that you probably know. And they really care about their community and the service that they're providing. But I think there's this like, hey, it's a Dunkin Donuts.

I don't want to say any bad words, know, bleep the man and they think they're doing this like big thing, but they're really hurting a local business owner. So the other thing I wanted to share on this is that there's, can't remember all of the actual numbers to this, but there is a lot of,

support around the idea that franchise locations that make money, that money is then spent back in their communities. It stays in their communities versus if you shop at a Walmart, if you shop at a Target, those dollars tend to not come back and circulate in your community. So by supporting your local franchise owner, you're actually supporting someone that's hiring local people, spending money for those people in your local market, and then putting that, their charity work,

Katie Ingalls (13:57.92)
Mmm.

Michelle Rowan (14:09.42)
back in your local market so you really are supporting a local business owner when you support a franchise location.

Katie Ingalls (14:15.339)
Yeah, so it sounds like it would be important just to do some research on your community and see what is a franchise, what is locally owned so that you can support your community. That's really great.

Michelle Rowan (14:24.748)
Yeah, it's a great idea. I think we try and put a focus on it. The International Franchise Association does a great job. Small Business Saturday is the day after Black Friday. And I think it's a local, usually there's a lot of local buzz about make sure you're shopping local. And that's a great opportunity to visit franchises or to talk about the different types of franchises in the community. And I remember I went to an event in Washington, DC, where they go and they talk about what policy is affecting franchising.

But they said, you know, when you're in a cab, when you're in an Uber, talking to people about what you do and more about franchising or asking them what they know about franchising is a great way to get some of these myths out or just educate people. And it's so great when you find a lot of these Uber drivers, it's not their only gig. They're doing other stuff. They love to talk about business. They love to hear what you're doing. So it's a great opportunity for you to talk about what you do at parties or when you're in those events, if you're traveling for franchising.

telling people why you're there and what you're working on. I think it just helps everyone understand and see the people behind the model of franchising, not just the structure of the business.

Katie Ingalls (15:34.945)
Yeah, just have those conversations, start those conversations. That's really cool. And I've even learned a lot going through the myths. I think it's important. I think that these conversations need to be had more frequently with more people.

Michelle Rowan (15:44.268)
Yay! I was going to ask you if you learned anything new, so that's excellent. Any other myths that are buzzing in your head or that you've heard that you want to ask about?

Katie Ingalls (15:49.599)
Yes, yeah.

Katie Ingalls (15:56.703)
I don't have any at the moment. I will say that the one that shocked me the most was when we were speaking about it not being an industry. Not so shocking as much as it's reframing the way that I think about it. And I think that the verbiage there is interesting. Yeah.

Michelle Rowan (15:58.67)
Okay.

Michelle Rowan (16:14.188)
Yeah, think that's really cool, understanding that we're not, I still feel, I want to fight this one, Katie. I still feel like we are just because of the people that I have in it, but that's, I think it's great that we taught you something new.

Katie Ingalls (16:28.617)
When you have that many people doing something in a common goal and they're all kind of in a community, you do want to call it its own industry for sure. Yes. And I also really love putting that emphasis on the fact that franchises are locally owned and operated. A lot of them are locally owned and operated because then that way, you know, especially nowadays, just looking at are they the man or are they your neighbor?

Michelle Rowan (16:35.512)
Yes.

Michelle Rowan (16:52.162)
Yeah, yeah, I love that. And it's usually easy to find out if it's locally owned and operated. And you can ask when you're in the store, which is great.

Katie Ingalls (16:58.549)
Yes, and a lot of the time they'll even have like a little sticker maybe in the drive-through window. I noticed my Duncan by my house actually is locally owned and operated and I thought that was really, really great.

Michelle Rowan (17:09.526)
Yeah, it's a great point too for franchise owners to think about putting that in their window. Well, that's excellent. I hope that if anyone else has myths or questions about franchising that they're gonna come back to FBR because we really do love sharing this type of information and just wanna make it less mysterious, right? We're here to debunk myths and also just kind of share the franchise experience with everyone. Awesome.

Katie Ingalls (17:32.983)
Totally. I couldn't agree more.

Michelle Rowan (17:35.768)
Katie, you are an excellent guest. Thank you for all you do here and come back and visit us on another topic.

Katie Ingalls (17:41.779)
Absolutely. Thank you for having me.