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Starting A Franchise Business: Mistakes to Avoid
January 27, 2020
Starting a franchise business can be risky, and takes courage and a certain know-how. But along with those risks, come some unique benefits such as the support of an established franchisor.
Does that mean starting a franchise business is easy? No, and that’s why you need to know the mistakes so you can avoid them when starting a franchise. In this article, we take a look at some of the pitfalls and snares that could trip you over when you take on a franchise for the first time.
What makes starting a franchise business different from an independent business? A franchise is a licensed business or brand. Franchisors sell franchises and those taking on the license become the franchisee. This is the real difference between the franchised business and the independent business. The franchise also comes with a proven business model. On top of that, you get ongoing contact and backup from the franchisor. You’re part of a larger brand, though you take on the responsibility of the day-to-day running of your business and some of the profit.
While there is that extra support to the hand, mistakes can always happen. We take a look at 20 you need to avoid when starting a franchise.
1. You Hit the Ground Running and Lost Momentum
You flung open your doors and all was going well for the first few months but you seem to have run out of steam, why? Could you have fallen out of touch with your franchisor? You may have lost sight of that business strategy and not implemented it effectively. It’s time to engage with your original vision. It’s time to start making decisions that are going to put you back on track with your customer base and your business plan.
2. You Under Estimated The Cost of Running a Franchise
When first starting a franchise business, it’s easy to overlook the total cost of running a franchise. It’s even easier to find yourself in financial trouble. If you’re starting your business with financing from your bank, start your research early so you can figure out all the terms. Knowing where you stand is going to go a long way. Some banks will need a larger down payment than others. Do your research and find out who’s going to offer you the best rates.
3. You Chose the Wrong Franchise
If you were looking for a new car, would you buy the first one you saw in the showroom? Of course not, you’d do your research. You’d figure out what fits into your budget and what extras you were looking for. The same is true when choosing a franchise.
You need to shop around. Maybe the first franchise doesn’t match your skills. Do you have the finances to take on the bigger brand? How does one franchise compare to another? Look around and see what’s on offer before you take the next step. Choose carefully, it’s a lot to take on.
4. Relied Too Heavily on The Franchisor
While we’ve talked about accepting help from the franchisor, it’s important to remember that this is your business. For the most part, you’re calling the shots. You’re doing the hiring and firing and following the business plan that you put together. The franchisor will be keen to get involved with some aspects such as advertising but the day-to-day running of your business falls to you. It’s you who will be shouldering the responsibilities.
On top of this, you will find that much of the business support available will be available as a template. This happens so the franchisor can roll out generic support to a wide group of franchises. Individual support for your business may not arrive in a way that answers your specific needs.
5. You Didn’t Meet Your Customers’ Expectations
The very real benefit of starting a franchise business and owning a franchise is that your customer knows exactly what it is they’re getting when they set foot inside your business. Take McDonald’s, wherever you are in the world, a Big Mac is a Big Mac. You assure the customer that they know what they’re spending their money on and will understand every aspect of their experience.
If you find yourself drifting away from that original offer, for whatever reason, you’re going to feel the hit. Your customer base chooses your franchise precisely because they know what they’re buying. They’re not looking for new content, or if they are it’s within the strict limits of your brand guidelines.
6. Flying Solo
You may have a lot of experience and a strong business background. This doesn’t necessarily translate to success in the world of the franchise. At times, it can feel very isolating, especially when you find yourself going through a slump.
One mistake you should avoid when starting a franchise business is cutting yourself off from other franchisees in your area. Get to know them. Meet up and talk about business, bounce ideas off of each other and share your experiences. They may be a competitor in some small way but having people on your side who know the challenges you face is well worth having.
7. You Were Unprepared for Success
Sounds strange, but it happens all too often. The franchise you bought was the right fit for your locality and your business plan. Now you’re struggling under the weight of your own success.
When you take on your franchise, think about how you’re going to prepare for growth. By growth we mean taking on extra staff, making some changes to the way you process orders, starting customer engagement and so on. Have your plans in place and success won’t take you by surprise, you’ll be ready and waiting for it.
8. Flying by the Seat of Your Pants
In the same way, you’re not prepared for success, there is a high chance you’re not prepared for the other challenges and holes that you might fall into. From an unstable political environment to a downturn in the financial health of your country. Like any business, your franchise needs to be ready to trade in any climate.
How will you persuade customers to spend their money with you when they’re watching every dollar? Sure, the franchisor might hit the advertising hard, but the individual success of your branch is down to you. Have plans in place and get ready to ride the bumpy waves of business.
9. You Neglected Your Staff Training
You’ve heard it said on many business forums and that’s because it’s true that your staff are your greatest asset. They run the business on the ground. They are also the brand ambassadors of your franchise and carry that with them as they finish work for the day. Training up your middle-management team is an important piece in the franchise jigsaw.
The best thing you can do is to lead by example. Show your managers how to get the best out of staff to achieve growth and maximize profit. Show how you interact with all elements of the business and lead them in the way you want your management team to go. You will find that delivering staff training will also remind you of the basic principles of running your franchise.
10. Not Knowing When to Quit
Statistics show that the average franchise agreement lasts between five and ten years. If you haven’t done so already, write down your own personal career goal for both of these terms. If, after five years, everything is going along as you expect then you may want to renew your commitment to the franchise. If being a franchise owner is not shaping up quite as you expected you’ll need to make a decision whether to stay or to go.
At that point, it’s crucial to have an exit strategy primed and ready to go. Terminating your contract early is likely to lead to financial penalties. It makes sense to have a pot of money set aside to cover that expense. This is helpful for exiting before you encounter any more financial loss.
11. Failed To Get The Right Legal Advice
When starting a franchise business, there’s paperwork and there’s due diligence to go through before you’re the proud owner. If you think you can go it alone, checking off all the legal requirements, you’re either a lawyer or you’re trying to cut costs.
The simple answer is don’t cut corners. Legal requirements for franchisees vary from franchise to franchise. You will need a lawyer with the right knowledge and experience to protect your interests as you go through the process.
12. Thought You Had Autonomy
Running a franchise carries different and even lower risks than setting up your own business. Yet, you need to remember that your business is part of a bigger family. It’s a mistake to think that you have overall control of the direction of your business in areas such as decor, special offers and so on. It’s tempting to go “off script”, in reality, you may find yourself in breach of your trading agreements and that in turn may lead to a financial penalty.
13. Not Getting Involved With the Community
Your customers are likely part of your wider community. They are the people who develop brand loyalty for you. They are the people who return again and again to your franchise and they are the people you’re marketing your franchise to.
That’s why getting involved in community initiatives can be great for your marketing. It is also a novel way to engage with your customers on a more personal level. Talk to your franchisor about Corporate Social Responsibility (CSR) projects. Find out how they might benefit your franchise.
14. Lost Your Way With Marketing
It’s easy to rely on your franchisor to take the helm when it comes to advertising on a national level. As a franchisee, it’s up to you to support these marketing efforts by getting on board with the various campaigns and executing them to their fullest.
It’s not every business that gets access to so much marketing support. If you want your franchise to achieve great things, then don’t lose momentum when it comes to your marketing activities.
15. Got Lost in the Idea
The franchise you’re going for might just be a brand that you have a strong affinity with. Perhaps it’s a restaurant that you have fond memories of as a child, or maybe a gym franchise that plays into your love of fitness. It’s all too easy to get swept along by nostalgia or your own personal interests. Instead, you should be looking at the business model and checking out how viable it is.
Try and put aside your passions and view the franchise simply as a business opportunity, with all the pros and cons that come along with it. Just because you want something to be yours, don’t push through the deal without first carrying out your due diligence.
16. You Thought a Franchise Was Going to be Easier Than a Small Business
Your whole personality and the way you approach your franchise shows that you do or don’t have the right temperament to take on a franchise. You’re also surprised to find that running a franchise is no less risky that starting your own business, just in a different way.
Don’t make the mistake of confusing the two. You’re one or the other, so follow your heart and your skill set when it comes to making the right choice.
17. You Might Not Get The Gig
As surprising as this might sound there is a chance that the franchisor could reject your application. Why? Perhaps your vetting showed up in some areas that the franchisor has questions about, or maybe they just don’t think you’re a good match for their brand. Chances are you’ll be fine. Yet bear in mind that if you do get rejected, the reasons might be valid and you may be better suited to another franchise altogether.
18. You Haven’t Considered the Grand Opening
Take our word for it, the grand opening is a big deal for a new franchisee. This marks the latest expansion for the franchisor. It’s also your first opportunity to connect with your customer and your staff in a meaningful way.
Look at this opening as a great opportunity to network. Talk to your franchisor for ideas on best practices and how to get the most from the event. Plan accordingly and with luck, you’ll have queues around the block.
19. You Didn’t Ask Around
If you have been thinking about starting a franchise business, you may have talked to some fellow franchisees but how about some others in your contact list? With a little research, you’ll find the numbers for business organisations in your area. Spend some time talking to them and you’ll figure out if a franchise really is going to work in your area or if you should walk away.
Talk to the experts. Learn from the experts, before you sign on the dotted line.
20. You Forget to Enjoy Your New Role
We left this until last because it’s one that has nothing to do with your business sense or your marketing plan or even your management skills. Yet it’s equally as important. When you took on your franchise you took a brave and tenacious step to run your own business. Some of the details are different when it comes to running a franchise. There are ups and downs but you’ve taken on the responsibility of making it a profitable and growing concern.
When you’ve got this far in your career and you see your franchise starting to turn over the kind of profits you know it’s capable of, take a minute to give yourself a pat on the back. This is a sign that your business model is working. It shows that your relationship with the franchisor is on track and that you haven’t fallen into some of the pitfalls mentioned above.
To Conclude
Starting a franchise business needs people who are passionate and driven. People who are prepared to take risks. You’re not on your own when it comes to running a franchise but how much of a success you make of the opportunity is very much down to you.
There are many pitfalls you can fall into when it comes to taking up a franchise but many ways to achieve your goals as well. From keeping up with your marketing campaigns to listening to the experts, you have all you need at your fingertips.
Whether you’re a business expert or looking for your first opportunity, a franchise might be just the stepping stone you need. Find a franchise that you’re interested in. Find one that has a proven business model and start planning for your future, today.
If you’re interested in starting your own franchise and for more information, please call (800) 967-8127 or email us at franchising@wini.com and one of our experts will contact you promptly.