Franchises

First Time Franchisees, Here Are Common Mistakes You Must Avoid Making

Some misconceptions and preconceived notions can lead to disastrous decision making for franchisees
First Time Franchisees, Here Are Common Mistakes You Must Avoid Making
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3 min read

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While Franchising is considered to be a safe growth opportunity, it does have its sides of grey areas which many new and aspiring entrepreneurs tend to overlook. Here is a checklist to ensure you do not make the same mistakes.

Bigger is not Always Better

It’s important to learn that not always the most popular and bigger brands make excellent franchise opportunities.  It is important that you do your homework, research about the popularity of their service or product, the owner and his or her credentials, what is the media talking about the franchisor, is there a robust support and training system in place etc.

The First One Takes it All? 

It is not a false alarm if you are the first franchisee in a new business. Be very careful and think it out clearly before you decide to make such an investment.  Be well aware, that you being the first in an endeavour, may not have a smooth sailing on any ground, as with you the franchisor will also be learning the ropes of the game. You may land up feeling more insecure and might have to wait longer on return on investments. But this is entirely a personal choice a franchise must make. A better way to handle this situation is to do a thorough check on the credentials of the franchisor.

Peoples Person!

 If you think you are a people’s person, this does not mean you will make an excellent franchisee boss.  It is advisable to discuss this important requirement of running a successful franchise business with your franchisor. Once you acknowledge you need help, look for ways to educate yourself and undertake training. This is, therefore, another point to be taken into consideration when you are choosing your franchise partner.  Look for a partner who can impart such training to you and make your business endeavour a successful one.

Being your Own Boss, Not Always True:

Sean Kelly, a franchise advisor explains that it is a big mistake to think you are simply running your own show. Fact is, you are not the boss in charge and cannot make changes without the knowledge of your franchisor. “Franchisees are not part of a larger collaborative relationship and they are not part of a team. They have essentially taken on a master and that controlling force has the upper hand at all times.  Most franchise agreements give franchisors the power to change required procedures, radically alter the product line, or require franchisees to make unexpected expenditures.” In the mountain of legalese that are franchise contracts, franchisors can even sneak in language absolving them of any number of lies and misdirection while taking away the franchisees’ right to raise a grievance.”

Franchisor versus Franchisee:  

Remember that the hard truth remains that a franchisor can continue to make profits, even if the franchisee isn’t doing well. A Franchisor will continue to get margins and royalties from its franchising partners. “Most franchisors receive a percentage of a franchisee’s gross sales, regardless of whether the franchisee is profitable,” Kelly explained. “Others mark-up equipment, products and supplies they require franchisees to purchase.  Still others ‘churn’ franchise locations, reselling them over and over for a profit.”  

The article was originally published on Franchise India by Uttara J Malhotra.

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