7 common franchisee mistakes and how to avoid them

FranchiseSales.com takes a look at seven easily avoidable mistakes that are all too widespread among new franchisees.

For many people, buying into a franchise is an ideal way to become their own boss. As with any financial venture it’s not a risk-free option, but the existence of a tried and tested business model helps them avoid pitfalls commonly associated with start-ups.

But it can still go wrong, often in one of the following seven ways – and these problems are easily avoidable.

1. Putting profits before enjoyment

When people investigate their franchise options they often start by identifying sectors or business models known to be lucrative.

While making money obviously matters, there is also a clear correlation between franchises that succeed with having owners enthused by their industry of choice.

Choose something you will find satisfying and you’ll have the determination to surmount the inevitable hurdles and inspire your employees to do the same.

2. Underestimating the costs

A franchisor may present you with a price that covers the franchise fee alone, rather than the total cost, which would include such overheads as legal fees and working capital.

You should therefore request a comprehensive breakdown of what is included and add any missing potential costs. Where an accurate figure is difficult to ascertain, overestimation is always preferable to underestimation.

3. Inadequate research

There are many avenues of research to pursue before making any firm commitment.

Don’t take the franchisor’s claims at face value; verify their accuracy by browsing Google and online forums for evidence of franchise failures associated with that brand, as well as disgruntled franchisees or customers.

4. Not speaking to existing franchisees

Always talk to existing franchisees. A reputable franchise will be only too happy to put you in contact with some – so walk away if they show reluctance to do so.

Put a prepared set of questions to several franchisees. Their answers will be more informative than any amount of sales patter from the franchisor.

Pay particular attention to franchisees with a similar background to yourself. Worried that your lack of hospitality experience makes you ill-suited to a restaurant franchise? Your fears will be assuaged if you meet several franchisees who succeeded despite the same apparent shortcoming.

Neglecting to speak to established franchisees shows a reckless disregard for due diligence, which bodes ill for someone intending to run a business.

5. Expecting complete autonomy

The idea of owning a business is synonymous with having the freedom to make your own decisions – hence the phrase: ‘be your own boss.’

While this may be true when you start your venture from scratch, the franchise model demands strict adherence to a proven formula. This is the price of this low-risk business model.

Fail to follow the franchisor’s instructions – on prices, decor, product range and so on – and you risk invalidating your legal agreements.

Only those who appreciate the need for strict adherence to tried and tested practices should contemplate buying a franchise.

6. Failure to seek appropriate legal advice

Enter a franchise contract without a full understanding of the terms and conditions at your peril.

While most people engage some form of legal representation, they often fail to have documentation inspected early enough in the process or to appoint a representative with enough experience in franchise agreements to understand their nuances.

Employ a legal specialist in the franchise field and request a comprehensive explanation of any areas you find difficult to understand.

7. Trying to run before they can walk

It’s hardly surprising that people who want to be a franchisee are often ambitious, driven people.

However, one of the most common mistakes franchisees make is trying to expand too quickly or agreeing to take on too much in the first instance.

Even with confidence in the model, it’s wise to make a success of your first outlet before acquiring others.

Few non-franchised businesses are as straightforward as a franchise. It is the experience of those who have already trodden the same path that allows the franchisor to hone business practices over time.

The model is established, the expectations are clear and – so long as you choose the right franchise – the prospects excellent if you stick to the plan and heed the advice of your franchisor.

If you have made any of these mistakes or the franchise has not lived up to expectations, then you may wish to find out what to do when the franchise relationship turns sour .

Melanie Luff

About the author

Mel wrote for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other global industry publications.