As more people find success with franchising, the truth is that there are those who do not. While there are many reasons as to why a business fails, ultimately the reason is poor management. Subsequently, no matter how successful a franchise is, whether it is limited to just a few states or is a global concern, it can go wrong.
There are certain things that can be done to minimize failure though. Below are 10 of the most common franchising mistakes and how to avoid making them. Hopefully, you are not reading this too late for it to be of use.
Franchising mistake #1 – Not knowing who you are
All too often, people look at franchises that are doing well and think that it will work for them. The simple truth is – this isn’t the case. The graveyard of franchising failures is full of the metaphorical corpses of people who did not know about themselves enough.
Taking time to reflect about yourself and where your true talents are will help you make the best decision in regards to how to run a franchise.
Franchising mistake #2 – Going it alone
Starting and running a franchise is not easy. There are a lot of things to take on board and understand. For all of us, it is overbearing. However, many failed franchisees attempt to do everything themselves. Perhaps they think it will save time and money, but the reality is, it just causes a mess.
It is not hard to avoid this particular mistake. Researching the world of franchising is important but, more than this, seeking help from professionals is essential. From franchise consultants to financial advisors, all and any help should be actively sought. Most important though, is getting a franchise attorney.
Franchising mistake #3 – Overreaching financially
All too often, people just do not do their sums properly. They see the headline profit of the best performing franchise, and think that they will do better. Chances are, they will not. It is essential to drill into all the figures. Consulting the Franchise Disclosure Document (FDD) and Uniform Franchise Offering Circular (UFOC) documents is also important.
While the initial investment may be affordable, many franchisees run out of operating cash. Even if they are doing well, the first few years of a franchise are hard, with outgoings often being above income. Understanding this is important.
Franchising mistake #4 – Credit cards
Closely aligned with mistake number three, a surprising number of franchisees get their initial funding from a credit card. This is just dumb. With most good franchisors able to help find quality funding, and preferential lending rates usually available on franchises, resorting to the plastic fantastic is ridiculous. Just do not do this.
Franchising mistake #5 – Assuming it’s easy
Amazingly, there are still people out there thinking that running your own business is easy. It is not. It never is. This is true for any business model, from start-ups to the best franchise out there. It will take a lot of hard work, training, dedication, hours, and effort – as well as sweat, blood, and tears, in all probability. If you are not comfortable with hard work, look for something else to do.
Franchising mistake #6 – Overpopulated sectors
Often, the mistake people make is an easy to understand one. They see a franchise segment doing well, and think that is for them. However, if there are a thousand and one franchisors operating in a sector, it is going to be very noisy. Typically, B2B franchises such as print services are good bets to go with, with a reliable trade and low level competition.
Franchising mistake #7 – Listening to friends
As much as it is sensible to discuss franchise options with friends and family, they can sometimes give the complete wrong advice. They are always going to give advice based on them – their skills, their experiences, and their tastes.
Taking advice from people you know is fine, but only when this advice is put all together and used to make a decision that is your own.
Franchising mistake #8 – Not listening to existing franchise holders
Completing online research into a franchise is done by the majority of failed franchise owners, as is talking to the franchisor and asking them questions. However, very few actually take the time to go visit franchises not recommended to them by the franchisor.
Simply taking a drive to the next town, city, or state, and having an informal chat with a couple of franchise holders, can reveal a lot about the true health of a company.
Franchising mistake #9 – Loving the product
When you run a franchise, it is important to develop a desire for the product or service you are offering. This is certainly true when selling to businesses, which respond well to enthusiasm and eagerness from their business partners. However, becoming too closely attached to the business is always a danger.
Being too closely involved in such a way essentially puts up a set of blinkers, creating tunnel vision. This makes it harder to see problems coming, particularly from a distance. It also makes it almost impossible to see when the best time to get out is – which is sometimes the difference between being a successful franchisee, and being one of those corpses mentioned earlier.
Franchising mistake #10 – Having no business plan
One of the biggest mistakes that failed franchisees make is not making a good business plan, or not making a business plan at all. A business plan essentially lays the ground rules for running the franchise. It is always good to have something to refer back to, to check that things are being done in the right way.
Creating a business plan is not the hardest thing to do in the world, but it is necessary. It can also be the saving grace of many businesses, by reminding them just what was intended at the start of the venture, ensuring the basic objectives are not lost.
It truly is possible to take control of our own lives, and it is truly possible to succeed in life. However, making dumb mistakes is not the way to do this, so going into a franchise with open eyes just makes sense.