Are franchise owners entrepreneurs? There’s a surprising amount of debate both ways as to whether or not franchise owners count as entrepreneurs. On the one hand, they own and manage their own business, often with just as much risk as an independent business owner. On the other hand, they’re following a pre-written model and don’t get to make many of their own choices.
Based on many different franchise opportunities – from restaurants to cleaning services, remodelers, childcare and more – we put together this list of what rules franchise owners generally have to follow.
So are franchise owners entrepreneurs? Read on and decide for yourself!
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What You CAN Do as a Franchise Owner
Choose Your Location
As a franchisee, your knowledge of the local area is extremely valuable. Corporate headquarters typically trust in you to find the best location for the business. That’s said, there’s usually a list of rules about where you can open up. You may need to be 5 or 10 miles away from other franchises, have a certain square footage, a certain number of parking spaces, etc.
The franchisor will likely also have lots of optional advice. Based on their experience with other locations, they can tell you if you’re better off in a strip mall or an office park, near a major highway or along a downtown street, etc.
The decision to buy or lease you space is another decision you must make. Read more about your options here.
It’s your business, so it’s your staff. As a franchise owner, you control who you hire and who you let go from your team. Recruiting, training and managing, of course, can be very time consuming. But this is one of the key aspects of running a business, and one of the few ways you are empowered as a franchise owner.
Once the terms of your contract are up (usually 5, 10 or 20 years) you can do whatever you want with your business: close it down, sell it, or run it independently under a new name.
You can usually sell your business before the contract terms are up, but not without some stipulations. The franchisor doesn’t want to work with just anybody, so they usually require you to get approval before you can make a sale.
One of the biggest choices a franchise owner can make it the obvious one: what franchise? For help with this decision, we’ve put together a thorough guide on How to Choose a Franchise.
What You CANNOT Do as a Franchise Owner
Set Your Own Prices
The precise rules vary from franchisor to franchisor, but in general, franchisees cannot set their own prices on the products and services they sell to consumers. Some will outright prohibit you to raise or lower prices, while others set maximum amounts that you cannot charge above.
Choose Your Own Supplier
Many franchisors will require you to purchase supplies from their list of “approved” vendors. There’s a few reasons for this: For one, this lets the franchisor control quality across all locations. Be that pizza ingredients, cleaning supplies, or automotive repair tools, with everybody using the same supplies, there’s consistency.
Secondly, the franchisor can usually negotiate lower rates from these suppliers since they’re bringing a high number of buyers. This is not always the case, however. I read one story from a franchise owner who was contractually obligated to pay $16 per case of bottled water when the same product was available at a supermarket down the street for $8.
When a certain convenient store chain changed their name to 7-Eleven in 1946, they wanted to promote the fact that they were open from 7am to 11pm. These extended hours were so unique at the time, they became a major part of 7/11’s brand image. So imagine if you needed to go to a 7-Eleven back then at 10:30pm for some milk and found that they were closed? You’d be disappointed and probably a little angry with the brand.
This is the logic behind controlling business hours. For retailers and restaurants especially, store hours can be a major part of the brand image. Thus, as a franchise owner, you typically don’t get much control over when you open and close each day.
Negotiate your Contract
When you sign a lease for an apartment or sign an employment contract, there’s typically a negotiation phase where you can make changes to the terms of the agreement. This rarely happens with franchising. Why not? Because allowing any flexibility in the way each store runs contradicts the main point of franchising: That each location is essentially the same.
For very small franchises you may get some flexibility. But for medium and large franchises, don’t expect any wiggle room in the contract.
The Grey Area
As you’ve probably already discovered, there are a lot rules that vary depending on the specific franchisor. Here’s a few more that can go either way depending on the franchisor you’re working for:
Manage Your Own Website or Facebook Page
Larger chains will likely have one website for all their locations. Your franchise may get a subdomain, or appear on a “search by zipcode” tool. They’ll probably also have corporate Facebook pages, and may prohibit from starting your own for the sake of brand consistency. Smaller chains, on the other hand, might be more lenient. You may have the freedom (or the expectation) to manage your own pages and make regular updates on social media.
Run Your Own Promotion
This is another matter that varies a lot depending on the franchise. Some strictly prohibit franchisees from running their own sales and promotions. They may instead have nationwide campaigns that you’re required to participate in. Others give each franchise the freedom to run their own promotions. In this instance you can enjoy more creativity, but it also means extra work (and extra dollars) spent running the campaign.
Refuse A Corporate Promotion
Major chains are always running promotions – whether it’s coupons in the Sunday paper or major TV ads. Your freedom to decide whether or not to participate will depend on your franchise contract, and it can make a big difference on your bottom line.
For example, let’s say you run a frozen yogurt shop and your franchisor is promoting a new flavor by offering 25 cent cups. Corporate sends a few bags of the new flavor but it runs out in just one day. For the next week you have to supply the frozen yogurt on your own dollar, or risk legal action from the franchisor.
Even in cases where promotions are optional, you may feel pressured into participating by angry customers. “But down the street it’s just 25 cents!” a customer says. This puts you in a difficult situation of losing money, or potentially losing customers to another location.
Bottom Line: So are Franchise Owners Entrepreneurs?
If they pick their own suppliers, set their own prices, manage their own website and run their own marketing campaigns, the answer is clearly yes. Their job requires much of the same creativity as an independent business and they also face much of the same risk.
All of these things are fairly rare with franchising, however. By and large, things such as store hours, prices, and advertising are all set in stone by the franchisor. So the more common answer here is no: in most cases, franchise owners are not exactly entrepreneurs.
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