Franchises are over-rated as new business models

U.S. News and World Reports Magazine says that the prospect of new business success of franchises, is over-rated. The magazine quotes John Jantsch, small-business consultant and author Duct Tape Marketing: "They can attract customers, but at the end of the day, it's not that profitable. The start-up costs are high, and you're paying royalties to the franchises."

Despite the fact that self-employment as a business owner creates numerous opportunities for taking a bite out of taxes, I wholeheartedly agree with John Jantsch's assessments.

What does a franchiser have that you don't?
1. Training? Can't you get that somewhere else for much less, or for free? Many times, vendors provide adequate (often free) training.
2. Tech support? Again, vendors to the rescue.
3. A marketing plan? Read John Jantsch's books.
4. A proven concept? Of course the franchisor says its proven, but if it really is there will be enough public information that you can certainly emulate the basic concept, garnering most purely by observation.
5. Financing? Franchisor-provided financing may be easy, but it's not necessarily the least expensive financing. If you can't get outside financing, you should reconsider the whole idea.
6. A brand!! Yep, Americans love brands. So, get a creative team together, even college seniors or marketing interns, and create a memorable brand name, a logo and a workable mission statement.

The difference between profit and loss, especially in the important first years - and ultimately success or failure - can be the amount of royalty you're obligated to pay a franchisor, sometimes up to 19-20%.

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.