When you buy a franchise, there is a brand, training and franchisor support on hand. However there are still risks in running your own business.
In the dynamic world of business, entrepreneurs and investors are constantly seeking avenues that offer a blend of innovation and security. Among the most compelling options is of course investing in franchise.
When you buy a franchise, it comes with a plethora of benefits and potential for financial success; a recognised brand, training and franchisor support etc. – however, like any other part of the business world, it is not without risks.
The good news is that the most commons areas in which people fund themselves in trouble are easy to avoid with some foresight. So, with that in mind, let’s take a look at some of the common pitfalls to avoid to we can mitigate the risk factors of being an entrepreneur.
Due diligence
Neglecting to thoroughly review a disclosure document and franchise agreement can lead to potential issues down the line.
Both of these documents offer valuable insights that are key in helping you make an informed choice regarding the purchase of the franchise.
The disclosure document provides information about the franchisor's business, encompassing past legal matters, site selection policies, and the obligations shared between the franchisee and franchisor.
Meanwhile, the franchise agreement functions as the core contractual arrangement between the franchisee and franchisor.
Consulting with a lawyer or accountant experienced in franchising might involve costs, but you can’t put a price on the value of expert advice. They may help pinpoint any potential concerns within the clauses of the franchise agreement or the provided financial data.
Think profit
You might love the brand but think for second, is it one that will make money for you?
Enthusiasm is all well and good, but it is important to evaluate with a clear head.
Profit margins will keep you in business so make sure your chosen franchise offers the potential of a healthy financial return with a job you can enjoy!
Talk to existing franchisees
Who knows a franchise best? Take time to chat to current franchisees to get an insight into how the franchisor operates, how effective its systems and processes are, and whether it delivers on its promises.
Chatting with a good mix of franchisees – new and experienced franchise owners – so you get the best cross section of views.
Think long-term
What is your long term plan?
This is one area that is often forgotten amid the excitement and eagerness to own your own franchise business but remember to carefully examine the franchisor's policies regarding selling or exiting the franchise in the future. Understand the terms and conditions for transferring ownership or selling the franchise and evaluate if they align with your long-term goals.
Be realistic
It is important to have realistic expectations about what you can achieve. You need a good understanding of how you will make money, what skills you have, and the level of support available. If your expectations are misaligned with those of the franchisor and/or business reality, it can lead to dissatisfaction and poor performance.
Training and guidance
Training is vital for you to successfully operate and grow you business, and will allow you to reach your potential. And conversely, if adequate training and support isn’t provided, you’ll be at a disadvantage and in danger of not reaching your true value.
Make sure to ask about what training and support is provided and be honest about skills you would like to improve on.
Keep an eye on spending
Once your business is performing well, you might be tempted to reward yourself for all the hard work.
Be mindful not to be extravagant as cashflow concerns can spiral out of control quickly and strangle your business. Make sure your budget is suited to your current situations.
Stay focused
In the lifecycle of any business, there is a point where a business plateaus.
Do you site sit back and enjoy what you have achieved, or look for areas of growth to exploit?
Another area to be distracted by is external business opportunities or hobbies, especially if business is going well. It is vital to remain focused and not to become complacent.
Follow the system
This is the easiest of all the rules to follow. A franchise has a proven system that work. It has created success for franchisees already in the network. Following the franchise system is your simplest path to success.
In the ever changing world of business, franchising presents a unique opportunity to thrive within a proven model. By exercising diligence, foresight, and a commitment to excellence, franchise owners can navigate challenges, reap the rewards of their efforts, and ultimately pave the way for their entrepreneurial and financial success.