Franchising

Franchising Mistakes

Franchising mistakes can be avoided if you anticipate them. For entrepreneurs who are considering buying a franchise, this article on the most common franchising mistakes is a must-read article. Learn why franchise businesses can fail and take steps to make sure you don't make any of these franchising mistakes.

Talking with thousands of franchise buyers and owners has revealed many common mistakes that kept them from reaching the best decision for their situation.

Common Franchising Mistakes

Here are the most common franchising mistakes and false assumptions:

  • A great industry assures your success. Some franchisors point out how large an industry segment they address. While it's generally important that you are addressing a growing market, this alone will not make you succeed. The franchisor's training, marketing plan, site selection, how you implement their plan and many other factors will be more important to your success than just the size and growth trend of the industry served.
  • I can open my franchise for less than the franchisor predicts. Don't mislead your franchisor. If you are overly optimistic and undercapitalized you may be doomed to failure--through no fault of your franchisor
  • Bigger is Better. The more franchises exist in a chain, the more successful they all must be. Great marketing, aggressive salesmen, and an attractive industry can cause a franchise system to grow even though there are better franchisors in the same industry. Call many franchisees and ask them how much TLC they receive. Then check in other systems to evaluate the satisfaction level of their franchisees. Sometimes, in their eagerness to grow, a system will "overpopulate" a city with many units causing each to steal business from others.
  • Never be the First Franchise in a System. Who could get more care and attention than the first franchisee to join? IF the franchisor has good experience in its industry and you are confident that they will be able to help you replicate their success, being the first should not be injurious.
  • There's no need to hire an attorney nor accountant until I return from Initial Training. Early mistakes can be costly. Be sure to have a professional involved before you sign a check to your franchisor.
  • I'll use about 80% of the franchisor's business plan, but I'll modify it enough to fit my style of management and my town. If you buy a franchise, use their system. If you insist on doing it your way, you may violate your agreement and be terminated. Believe me, stick to the whole plan--or save your money and go it alone.
  • All franchise systems are about the same. Therefore, the biggest with the lowest price should be my choice. Each system has a culture of its own. Meet with the franchisor and meet or talk to several franchisees to see how you'll fit in. Some franchisors now offer lower royalties as you gain experience and grow your business; minimal renewal fees and other features to show their commitment to your success.
  • When you buy a franchise, your success is assured. Any new business venture involves risk. You must be ready to work long hard hours to implement the franchisor's business plan in order to succeed. The advantage is--you have a plan. The unknown is--how well you'll implement it.
  • I'm sure my banker will lend me money when I find the right franchise. Bankers are more willing to finance franchises than independents. However, they may not believe in you or your chosen franchise like you do. If you are gainfully employed now, set up a home-equity loan before you quit your job. Then the choice will be totally yours--not a banker's.
  • I know how to work with and manage people. If you have no (or a poor) experience in managing and working with a group of fellow employees, be sure to discuss this with the franchisor. In most systems, you'll be hiring, motivating, and training several employees. Signing a franchise license will not change you. If getting away from the people on your current job is a major motivator--it may be time to reconsider.

Article by Jim Deitz, president and founder of The Franchise Doctor. Visit The Franchise Doctor's Website for more information on franchising.

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