Joining the franchise industry can be an exciting and lucrative time in your life, but as with everything, there is a learning curve as you adjust to your new role as a franchise owner. To help you avoid some of the worst of the pitfalls, we have gathered a list of 10 franchising mistakes to avoid when starting a new franchise.
1. Not Getting Enough Financing
Unless you are independently wealthy, you are going to need to secure financing to fund your new franchise. It is important that you not only get the right type of financing, but also the right amount of money to not only cover all the startup costs, but also the cost of running the business for at least the first year. It can take that long to start to see a steady stream of profit.
Remember that if you go with a traditional bank loan, you will most likely need to give a 30 percent down payment. A lot of entrepreneurs choose to combine a Small Business Administration (SBA) loan with a Rollover for Business Startups (ROBS) which allows them to invest their 410(k) with paying taxes or having any penalties.
2. Failure to Utilize Franchisor Support
One of the biggest benefits of joining a franchisor program instead of going out on your own is that you get all that extra support for launching your business and even regular support around the year. The franchisor has knowledge and experience you don’t have so it would be one of the biggest franchising mistakes not to take advantage of it.
3. Not Following All the Rules of Your Franchisor
Your franchisor has to worry about its overall brand and image so they set up clear rules for you to follow and systems you can use to ensure that every franchise unit provides consistent quality of products and services. If you don’t follow all the systems laid out for you, you might end up making unnecessary mistakes that can affect the success of your particular unit and also cause problems for the overall brand.
4. Not Doing Enough Research When Choosing a Franchise
Maybe you really love the food or products of a particular franchise or maybe it is their mission and values that attract you. Many people get in to the franchise business, because they are already a loyal customer. While passion for a brand is important, there are so many other factors to consider like cost, support, location etc. Before making your final decision, make sure you have thoroughly researched at least a few different franchises.
5. Not Securing the Services of a Lawyer and/or Consultation
Especially if you have never owned a business before, joining a franchise program requires a steep learning curve. There are a lot of legal documents to fill out in the beginning and you are going to want to make sure that you understand them completely and that there aren’t loopholes that will cause you problems later. A franchise lawyer and/or franchise consultant can help you navigate all the paperwork and legalese a lot smoother than if you tried to do it on your own.
6. Not Sticking to your Business Plan
You are always required to create a business plan when joining a franchise program because it plays an essential role in the running of your business. It lays the framework of what you are doing and lays out clearly all the steps you need to take to be successful. When you deviate from your business plan, you are opening yourself up to a lot of problems.
7. Demanding Too Much from your Franchisor
You also need to make sure that you don’t demand to much help from your franchisor either. They are there to give you support and a framework, but you need to do the daily grind. If you can’t or are unwilling to do the hard work required to make a franchise successful then you shouldn’t get involved in the first place. And of course the most important responsibility you have is to attract a steady stream of new customers.
8. Not Diverting Enough Funds and Attention to Marketing
A strong marketing program is essential for any new business including, new franchises. Although your franchisor has a strong brand and loyal customers, you need to develop the customer base at your particular location. Don’t expect the franchisor to do all the marketing for you.
9. Having Too Much of an Ego
No matter how much experience or education you have, you are still infallible. We all are. If you go into the franchise business thinking that you know everything, you are only doing yourself a disservice. You need to be open to other people’s opinions and recommendations and be able to admit when you have made a mistake. Otherwise you are going to drive your franchise unit into the ground.
10. Don’t Recruit More Customers Than You Can Handle
Keep in mind that while strong marketing efforts are important to get attention to your new franchise, you need to be sure that you don’t overdo it. If you end up drawing more customers than you and your staff can handle, it will be a disaster. Your employees will be overworked and stressed and your customers will come away with a not so great view of your establishment if you run out of products, and there are long waits or service is poor.
Franchising mistakes like these are a lot easier to avoid when you hire a franchising consulting company to help you launch your new franchise. Starting a franchise requires a lot of different pieces of knowledge that you may not be an expert in. A franchise consulting company like MBB Management can help. Give us a call today.