You finally found the golden franchise opportunity right for you. It’s exhilarating, especially since you spent so much time looking for the perfect fit. There’s so much to look forward to. But be forewarned not to let the excitement of owning a business blind you from the reality of it all.
Launching a franchise requires a major time commitment, plenty of capital and tons of hard work. Remember, you’re still a small business owner, and owning a franchise can be as risky as owning any other small business.
That’s why we’re sharing some of the most common mistakes first-time franchisees often make, so you can avoid them on your way to setting yourself up for success.
1) Not Following the Proven Franchise System
This is the biggest and most common mistake first-time franchisees make. A franchise didn’t get where they are without a proven system. Try not to second guess the franchisor. Deviating from the plan can lead to repeating mistakes the franchisor or other franchisees have already made and have solutions for. Follow the plan through and through, not just bits and pieces of it.
When solving a specific problem, make sure your solution fits the brand. Franchisors implement strict rules because brand consistency is key to building customer relationships. It’s important for customers to have the same experience with each franchise, no matter where they are.
Signing the Franchise Agreement means you agree to stick to the plan. Failure to do so can lead to termination or worse, the franchisor can sue you for damages or lost royalties.
2) Not Planning Your Finances Accordingly
Many first-time franchisees have a tendency to underestimate the overhead costs of running a business. Other times, they do the opposite and overestimate the first few months of sales, causing them to run out of money before the business is established.
Market and product research are vital to avoiding this common mistake. Knowing everything about the business, the market and the product helps you better gauge how much money you’ll need to operate the business.
Utilize budgeting tools like Quickbooks to create a basic and realistic budget plan before deciding how much time and money you’ll invest. You should also always plan for the worst-case scenario; try your best to have a go-to capital resource for emergencies or if your original plan of action fails.
3) Not Asking for Support From Fellow Franchisees
One of the greatest benefits of franchising is being part of a wider team. Make it a point to connect and build strong relationships with franchisees in nearby or similar markets.
Past and present franchisees have been through all the trials and tribulations before. Use their experience to your advantage; learn from their mistakes by asking as many questions as possible and addressing concerns together.
Jeff Steele, a CMIT Solutions franchisee, told FitSmallBusiness, “I have learned more from two of the franchisees in my area than I could ever have imagined, and I owe my early success in large part to their willingness to help.”
Find the contact information of past, present and future franchisees in the Franchise Disclosure Document (FDD).
4) Expecting Too Much From the Franchisor
Yes, many franchisors offer ongoing support in several areas, including marketing, operations, training, logistics and more. But, much of the support they offer is templated. Many first-time franchisees assume the offered training and support means it’s something they don’t have to worry about; that’s not the case.
These systems are actually meant to help you get up and running; ultimately, you’re responsible for your business’ success and longevity. As a franchise business owner, you have the benefit of using the franchisor’s brand recognition. However, it’s your job is to get new customers, not the franchisor’s; think of them as a guide. This bring us to our next point.
5) Not Utilizing Franchisor Support
If you did your homework, you are part of a franchise with a structured support system in place. Don’t be afraid to contact your franchisor and their team of franchise specialists, especially during your first year of business.
Although they can’t run the business for you, their team can help provide much needed guidance, tools, resources and advice to help you solve problems that propel your business forward.
6) Not Hiring an Experienced Franchise Lawyer
This is a mistake that is often overlooked. As you know, franchisors are required to provide prospective franchisees with a Franchise Disclosure Document. Don’t just read it, go over it with an experienced franchise attorney.
These hefty 100- to 200-page documents aren’t easy to understand. Experts say it takes 20 years of education to get a full understanding of an FDD’s contents. An experienced franchise lawyer can help point out red flags, including territorial protections, growth potential, as well as the strength of trademark.
Tips Before You Go
Make sure to have an exit strategy for if things don’t get go as planned. As the saying goes, you can never be too prepared; make an action plan for what you’ll do if the business fails or if you run out of capital.
Another piece of helpful advice is that marketing efforts should always be ongoing, even when your business becomes profitable. Analyze both your failures and wins, and share effective strategies with fellow franchisees, too; you’re a team!
Avoiding the mistakes mentioned in this blog won’t guarantee success, but they’ll help you build a stronger business. The rest is up to you.