Buying a franchise is believed to be far superior to starting your own business in terms of actually making it past the first several years. A franchise already has an established business model and some franchisors offer a serious level of support to potential franchisees.
This goes from providing equipment and training, all the way to advisory roles in the newly founded franchise. However, some franchises still manage to fail. This is due to ignoring some sound tips and caveats that come with this industry.
To avoid the same fate, here are some major do’s and don’ts that a new franchise should abide by.
Do: Pick something to your liking
The first thing you need to understand is that running a business is hard. It requires you to invest extra hours, neglect your personal life and even sacrifice your own health and sanity. As an entrepreneur, you will be under a lot of stress on a daily basis and the only way to make it is to pick something you love doing. Returning to school is never a pleasant thought, yet, you’ll be asked to self-improve over and over again. These things come easier when it’s a topic that’s close to your heart.
Don’t: Guide yourself by profitability as the main factor
Just because something is profitable on paper, this doesn’t mean that it’s something that you should or can do. Knowing your limitations is incredibly important. It’s called being realistic, not doubting yourself. Being able to run a successful enterprise is not something impossible but your own skills, experience, knowledge and dedication will determine whether this is viable. You’re not likely to be as well-suited for every single industry. So, never pick a field-based solely on someone else’s positive experience. These things won’t necessarily translate.
Do: Perform market research
About 42% of all startups fail because there’s no market need for the product/service in question. The same thing goes for a franchise and the only way to avoid this eventuality is to do your market research beforehand. One advantage that the franchises have over original businesses is the fact that they already have a market presence in other areas. So, look for a suburb that is demographically similar to yours. This will give you a crude yet somewhat accurate assessment of the situation at hand.
Don’t: Expect to fight through this alone
The next thing worth keeping in mind is the fact that you’ll definitely need some help. You can’t run a franchise on your own, which is why it might be a good idea to have a partner, a team or a family willing to help out your business. Sure, you will still have to recruit new people and there’s no telling who your hiring strategy will attract. The key thing is that you shouldn’t enter this race on your own. Instead, focus on gathering the right kind of support from day one. This will drastically increase your survivability rate in the field.
Do: Research the franchise beforehand
Franchising is generally a proven method of doing business but it’s also an umbrella term. Just because one franchise has an unparalleled success rate and a ton of help in an offer for the newcomers, this doesn’t necessarily translate to the others, as well. Therefore, your research needs to be specific to the franchise in question. Namely, it needs to be a specific franchise from that specific industry. Interviewing other franchisees and looking at their performance records is also a decent strategy in this scenario.
Don’t: Ignore the location
Keep in mind that with the majority of businesses, the very location of the enterprise plays a major role in its subsequent success. Just think about the way guests talk about businesses in the hospitality industry. It’s usually the phrase “That X place on the Y”, where X is the type of food/beverage they serve and Y is the location. Now, with the franchise, the type of meals/products/services will probably be set and you won’t have much maneuvering space to alter it. On the other hand, you can still pick the location.
Do: Write everything down
It will take a while for your application, bid and the entire process to come down. This will give you plenty of time to consider the general direction that you want to take with your business. Some of these ideas will be pure gold but you would be surprised of just how much relevant information a human brain is able to suppress and… well, forget. So, write everything down. Generally speaking, if something is written down, you have the privilege of forgetting about it until later. Then, when you revisit the idea in a matter of days or weeks, you will have a much more objective outlook on it.
Don’t: Ignore the unforeseen factor
There are a lot of unforeseen things that could happen to a new business and to you personally. So, no matter how solid your game-plan is and regardless of the fact that everything seems to be aligning in your favour, there’s still room for things to go wrong. While this should never be your starting point, you need to leave some room for the unforeseen. Having the contingency plan and emergency means of funding can make a massive difference between success and failure. While you can’t predict absolutely everything, there are several business risk factors worth keeping in mind.
Do: Prepare your loved ones for the change
The start of any business is a stressful event. There’s so much to do and the majority of things require your direct attention. Even if you’re not the type of employer to micro-manage everything, the first several weeks and months will require a hands-on type of management. This means that you might grow distant from your family and friends, due to the fact that you’ll work insane hours and your mind will always be elsewhere. The best thing you can do is prepare everyone for what lies ahead. Their support might decide whether you make it or not.
Don’t: Ignore your work-life balance
Another important thing worth bearing in mind is the fact that you need an exhaust vent. Overworking yourself is possible only if you have proper intrinsic motivation. Now, unless you’re extremely competitive and simply enjoy pushing yourself at all times, you are probably doing all of this to support your friends and family. Provided that you start neglecting them because of work, you might start losing perspective on why you’re enduring all of this. Also, finding some time for your hobby or passion is mandatory in order to make it in the stressful environment of the modern business world.
Do: Make decisions based on data
The thing worth keeping in mind is that in the age of big data and sophisticated analytical tools, there’s no excuse for not making data-based decisions. In this day and age, anyone with an online presence and Google Analytics can learn quite a bit about their target audience. Also, there are many records, studies and stats pages online worth exploring. This is definitely an advantage that you shouldn’t ignore. Just by organizing your decision-making process in this manner, you’ll already place yourself head and shoulders above the competition.
Don’t: Put too much trust in intuition
While decisions based on intuition may be accurate or even life-saving, they’re simply not reliable. You see, your intuition is your subconscious warning you of a suspicious pattern based on your previous knowledge and experiences. Even if you can’t draw parallels consciously, your subconsciousness is recognizing these subtle similarities. The problem lies in the fact that you’re probably a newcomer to the industry. This means that your database is not broad enough for this to be reliable. Still, this doesn’t mean that you should ignore your intuition altogether, either.
Do: Shop around
When you start looking for a franchise, the key thing lies in the fact that you shouldn’t be complacent with your first find. Shop around a bit and look up different options and alternatives. You would be surprised to learn that even for the same amount of money, you might get a better deal elsewhere. Keep in mind that you’re also buying exclusive regional rights to the use of a certain brand and brand markings. This is where you’re allowed to be subjective, seeing as how objective metrics simply won’t make any sense.
Don’t: Forget to negotiate
Just because that’s a major corporation and you’re a potentially small entrepreneur, this doesn’t mean that you don’t have any negotiating power. The fact that they don’t have representation in your area shouldn’t be neglected. In other words, your potential success is in their best interest. Make sure to explain this. Also, when bargaining, remember that there’s more than just money. Ask about potential training, tools and development process. You should also ask about the additional support that you can expect from the franchisor in the future. This is a huge issue that can make or break the business.
In the end, whether or not you face success in the franchising industry directly depends on your ability to follow the right course of action. Having a strategy is one thing but there are some mistakes that will actively ruin your efforts or set you on a path of no return. By simply knowing what to avoid and which threads to follow, you will have a more reliable road to victory. The above-listed do’s and don’ts are there to provide you with this advantage. Keep in mind, nonetheless, that there are a lot more factors to keep in mind and that there’s no such thing as a recipe for success.