When buying into a franchise, much depends on how you approach the process and whether you make smart decisions. While it’s natural and sometimes instructive to make a few mistakes, hare are four major ones to avoid:
Franchising Mistake #1: Limiting your options from the start
Lucrative opportunities in the franchise industry are plentiful, spanning across numerous concepts and industries. Keep an open mind when you start to investigate what’s out there. You’re only hurting yourself if you immediately narrow your focus to large, well-known brands or the trendiest new businesses.
Your best fit could be a concept you’re completely unfamiliar with at the start. Remember, food and retail businesses make up only a portion of the market. Franchise opportunities can be found in industries as diverse as fitness, senior care, education, and automotive services. And that’s just the tip of the iceberg. Many of these businesses are much less expensive than the restaurant and retail concepts, and may still enable you to meet your goals.
Franchising Mistake #2: Skimping on research
Once you narrow in on a franchise that seems right for you, you’ll need to gear up for your next phase of research. Look into the market for the company’s service and whether or not an adequate customer base exists. Is there a demand? Is the business performing well? How will location factor in? Are there upcoming changes in the market? The franchisor should be able to provide you with information backing up their claims that the business is successful and in demand.
It’s extremely important to carefully read the franchisor’s Franchise Disclosure Document (FDD), which contains a wealth of information. Some franchisors provide earnings data, and all include a list of existing franchisees, which brings us to our next common mistake.
Franchising Mistake #3: Failing to connect with current franchisees
As a prospective franchisee, you need to access a very valuable source of information: current franchisees in the system. Many people speak with everyone they know when contemplating a business opportunity, gathering information and opinions from family, friends, lawyers, etc. But they skip the most important people: those who actually own units of the franchise they’re thinking about.
Current franchisees can provide first-hand insights and information. What’s it really like running the franchise and undertaking the daily tasks involved? How effective are the franchisor’s training, support, and systems? Talk to a variety of franchisees, including top, middle, and lower performers, to get a full picture.
Franchising Mistake #4: Valuing your independence over the franchisor’s proven system
After you’ve carefully and thoroughly investigated and selected a franchise system, you need to adopt this mantra: trust the franchisor. You’re buying into a proven business. The success of the business is built upon the franchisor’s systems and procedures. Your job is not to reinvent the wheel; it’s to follow the system. Learn how to implement the operating system and adhere to the training you’ve received. Franchising is not an environment where it pays to go rogue.
Buying a franchise isn’t for everyone. However, if and when you make the commitment, it’s important to do your homework, follow the model, and work hard. As the saying goes, the harder you work, the “luckier” you get.