Starting a franchise requires plenty of time, capital, and hard work. Unlike other small businesses, franchising involves being associated with an established company, which means the stakes are higher.
That’s why we’re sharing mistakes common to first-time franchisees. This way, you can avoid costly repercussions and focus on setting yourself up for success.
Deviating from the franchise system
This is the most common mistake new franchisees make. The franchise model demands strict compliance with a formula that’s been altered and tested numerous times. This formula is implemented to ensure brand consistency and smooth customer experience across franchises, no matter where they are.
Signing the franchise agreement means you adhere to the plan. Straying from it can result in lost profits and damages.
Misunderstanding finances
One of the biggest financial blunders you can make as a franchisee is underestimating your initial costs. Apart from the franchise fee, the total price of starting a franchise would include other overhead charges, such as working capital and legal fees.
Before signing anything, request a comprehensive breakdown of all potential costs. An accurate figure can be hard to obtain, but it’s better to overestimate than fall short of funds. Learn everything you can about the business, including products, markets, and past growth trends. This will help you come up with a sufficient figure to operate the franchise.
As with starting any kind of business, create a realistic budget plan before deciding how much time and capital you’ll invest. Set up an emergency fund for worst-case scenarios and review your disclosure agreement thoroughly. While every part of that document is vital, take special note of the initial and ongoing investments required to ensure you don’t miss any costs.
Not seeking guidance from fellow franchisees
Running a franchise is tough. You can’t expect to get everything right the first time. That’s why it’s essential to connect and build meaningful relationships with franchisees.
Owning a franchise means being part of a bigger team that has likely been through similar challenges you’re facing now. Take advantage of their experience and learn from their shortcomings. Ask as many questions as you can on how to start a franchise business. Chances are, their answers will be more valuable and practical than any sales pitch you might get from your franchisor.
Failure to communicate with established franchisees is a missed opportunity to grow your business and avoid errors. The International Franchise Association can connect you to established franchises, training and marketing partners, and even legal support within the U.S.
Expecting too much from the franchisor
Some franchisors offer guidance in critical areas, including training, operations, logistics, and marketing. But even then, expect much of the support to be templated and not fleshed out. These systems are designed to help you get up and running, not guarantee your long-term growth. Despite being attached to your franchisor’s branding, you’re still responsible for attracting new customers and achieving success. At the same time, complete deviation from the existing formula may be detrimental to your business. The key is to find a balance between discovering new tactics for growth while staying faithful to the company’s branding.
Being a franchisee is different from running any other business. There might be less room for mistakes, but at the same time, rewards can be more fulfilling.
