Overrated Small Business: Franchises

You probably know someone who would love to start a business—they're just waiting for the right idea.

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You probably know several people who would love to start a business—they're just waiting for the right idea. Wouldn't it be nice to leapfrog the idea stage and go straight to a business model that has proved to work? That's the appeal behind becoming a franchisee of a popular restaurant or store chain. It seems that your success is more guaranteed in the always risky game of running your own business.

But some small-business experts point out that the franchise path isn't really that easy.

"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," says John Jantsch, small-business consultant and author of the Duct Tape Marketing blog.

That's not to say that getting into franchises is necessarily a bad investment. But the real returns might be beyond the reach of somebody looking to have just one business. "It seems overrated with respect to the individual entrepreneur," says Steve King of the Institute for the Future. "If you own 20, the returns look more attractive."


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franchising
small business
entrepreneurship