7 Mistakes in Starting a Franchise | ON DEMAND BOOKKEEPING
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7 Mistakes in Starting a Franchise

mistakes franchise owners make

7 Mistakes in Starting a Franchise

It is every business’s goal to expand. It seems like the measure of a successful business is the company’s ability to open a new branch or expand in another state. However, the risk is too great. It will be like opening your first store—you will need a large amount as capital, you have to hire employees that hopefully you could trust, get a place and buy furniture, fixtures and equipment. There is loads of work involved.


However, there is a way to expand without getting through all the above-mentioned hassles: franchising. A lot of entrepreneurs are looking at expanding through franchising because you don’t need to be in debt to widen your reach. When you open your business for franchising, you are basically expanding using the resources of others—the franchisee. The franchisor basically has no risk involved as leasing, employment, equipment, etc., will all be matters for the franchisee to take care of. However, as franchisor, you will have a lot of power when it comes to approval—the place, ambiance, and everything else directly related to branding. Your stress level is greatly reduced.


From a supervisory standpoint, the expansion unit will be managed by the franchisee. The franchisor merely takes care of the processes and the branding—of course, monitoring will be involved to make sure that the brand’s mission and vision are upheld. But day-to-day operations and stresses will largely be relegated to the franchisee. And without these everyday responsibilities, you can look at the bigger picture.


Of course, everything about business is a risk. There are still risks involved with franchising.

Mistakes Franchise Owners Make that You Can Avoid


Choosing a bad franchise location

Sometimes, because of the temptation of expansion, some business owners settle for a location. Every location should be thoroughly scouted—if possible, a survey should be made to guarantee that the location is safe, secure, and has the market to sustain a franchise. According to a report from The Balance, settling for a bad location is among the many pre-opening mistakes when it comes to opening a franchise. Picking the right place to set up a business or the franchise is not going to be easy. If you found the right location in just one go, then you’re not doing it right. Finding the right location takes time and multiple visits. Exhaust all possible areas, visit many places until you have satisfied all the appropriate considerations: cost, availability of the market, safety and security, accessibility, among others.


Forgetting that franchising is a group

Sometimes, starting a franchise will just seem like starting from scratch—opening a business from ground zero. If that was the goal, then why bother franchising at all? Business owners should always remember the principles of being part of a franchise—there are shared beliefs, ideals, principles and mission and vision. A franchise follows a crafted plan and every member of the group will do right to remember that. In the first place, there will be no franchising if the procedures did not work before. The franchising handbook has been proven and tested, hence, should be followed. As a franchisor, you have to make sure that the franchise understands the franchising bible—the franchise disclosure agreement. There should be monitoring as well, in order to keep franchisees on their toes.


 Not prepared to franchise

For the business owner, it would seem like franchising is the safest way to expand—this way, you don’t need to take out a loan to be used as capital in a business. However, this does not mean that you should just jump at the opportunity to franchise. You have to understand that when you expand through franchising, you will be the leader of the brand. You have to make the bible for this particular franchise—you have to set the tone, institutionalize the system and polish the brand. The brand you have started should stand the test of time and should withstand any traditional business problem. Also, you have to remember that not all types of business are cut out to be franchised. You have to understand what it entails to franchise before taking a large leap of faith. The best way to avoid this is to understand your business’s advantages and disadvantages, strengths and weaknesses.


Insufficient Capital

So opening a franchise may not be as monetarily risky as starting a business. After all, you are basically just expanding your business but with the resources of the franchisee. But this is not an excuse, though, not to prepare a capital. In some cases, the franchisors are the first financing option for the franchisee. Besides, if you have the authority to expand, you should at least walk the part—and that part means having the money to start a franchise and sustain it.


Being fixated on a trendy business

Franchising a trendy business is not always wise. As the word implies, trend could be fleeting. However, if you franchise something you have real interest in and are an expert at, it could potentially be for the long haul. Of course, if your interests and skills are on the line, it would mean commitment on your part.

Complacency in marketing

This is a very common mistake among franchise owners. They think that since they have already established a brand, hence, the expansion, then they no longer need to market. This is completely wrong. Just look at the biggest franchises in the world: McDonald’s, KFC, Burger King and Pizza Hut. They have never lain low in their marketing and advertising. In fact, McDonald’s has among the most interesting advertisements. As the business gets bigger, it is understood that marketing should get bigger as well.


Disregarding the saying that: Customer is always right

Just because the business is getting big doesn’t mean that you should start ignoring customers. The clients still determine the success of the business. They are still our bosses. As business owners, we should strive to continue to make customers happy. We should listen to them and improve our products and services through feedback.


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