Common mistakes franchisees make

franchise mistakes to avoid, the venture magazine

So far we’ve shared advice on what to do to ensure a successful start to your franchise business. We’d be remiss if we didn’t also highlight common mistakes to avoid. Firstly, pay your employees what they’re owed unless you want to invite a world of trouble. But there are plenty of less obvious pratfalls that can set you on the wrong path.

Not doing your homework

No matter how great the first franchisor you research seems, look at others at least for comparison’s sake. It might well turn out that the first opportunity you found is the right one for you, but you’d hate to find out the opposite is true after it’s too late and you’re locked into a franchise agreement. The Franchise Council of Australia has resources to help you find a reputable franchisor that fits you.

Not getting the right funding

It’s common to go months or even years before you see a profit. Meantime, the bills don’t stop coming in, and there’s payroll to meet. If you don’t have a loan for enough to keep the business afloat, you could be in danger of having to shut down before your investment pays off. If you have a loan with harsh terms, that could cut into your revenues and make it even more difficult to start making money. If you’re truly committed to seeing things through, you’ll need a source of capital to keeps the doors open in the event things go south. Franchise Finance Australia specialises in just this sort of thing

Paying too high a franchise fee

The franchise fee is something of a down payment. It means you’re in the club, but it just gets you in the door. If the fee is exorbitant, how are you paying for the actual day-to-day costs of running the business? What are you getting for your fee — in terms of agreement length and assistance from the franchisor? Inside Franchise Business has tips to help determine a reasonable fee.

Not Considering All Costs

franchise mistakes to avoid, the venture magazine

The franchise fee is just the beginning. Get a comprehensive estimate from the franchisor of the true operating costs. You’ll have employees to pay, equipment to buy, possibly rental or mortgage payments on the building. You’ll need a rainy-day fund for unforeseen circumstances such as equipment repair in addition to common maintenance.

Not Hiring a Lawyer

Even the simplest franchise agreements are complicated for the layperson and contain requirements franchisees must adhere to. A contract expert can review franchise disclosure documents to check for any red flags or point out clauses you might not have noticed on your own. Don’t go flying blind into an agreement you don’t properly understand. The Franchise Lawyer and Legal Vision are good resources for finding an advocate.

Not Having Realistic Expectations

You know the old adage: If something seems too good to be true, it probably is. If the franchisor is promising the moon, look a little deeper into their history and reputation. Learn from the mistakes of others to avoid being scammed. Even when you’re partnering with a good and reputable franchisor, it takes hard work to be successful, especially when you’re still learning the ropes.

Not Using Your Network

There are fellow franchisees who are in the same boat you are. Some of them have been working with the franchisor for a while and have insight to offer. Some may be newer than you and have questions but also offer a fresh perspective. A rising tide lifts all boats, and the more successful each franchisee is, the more successful the parent company is, making individual franchises more valuable. You want to be in a situation where fellow franchisees are colleagues, not competitors.

Not Following the Franchise Agreement

Your location or locations are not yours alone. No matter how much autonomy you have, there are still certain obligations you have to live up to as part of your franchise agreement. Some of them are related to specific products you use or suppliers you buy from. Some of them relate to hiring practices or hours of operation. If you can’t follow the rules, you could be found in breach of your agreement and lose your franchise.

Resting on Your Laurels

franchise mistakes to avoid, the venture magazine

You put in a lot of hard work to get your business up and running, and now the cash is finally coming in. Be careful not to let standards slip or get lax in hiring practices. Don’t stop spending marketing money on campaigns that have worked; it obviously is well spent and you want to remain in the public consciousness. If this is finally your opportunity to step back and take a breath, make sure you have good managers in place who keep things running like a well-oiled machine. There would be nothing more deflating than building the business from the ground up only to see it all come crashing down.

Not Loving What You Do

It’s a common trap to fall into: working so hard you lose sight of why you’re doing it. Maybe you got into this to have more flexible hours so you could see more of your family. Maybe you finally took the chance on getting into an industry you’re passionate about. Whatever reasons got you into this franchise in the first place, don’t forget them! If you’re not enjoying yourself, what’s the point?