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6 Common Mistakes of Prospective Franchises

While numerous businesses have successfully plunged into the wonderful world of franchises, just as many businesses have failed miserably when attempting to duplicate their success. Although the businesses that failed were different types of businesses and the approaches they took were varied, they each shared one thing in common. Their failure was not only predictable, but certain.

Failure isn’t an accident. Failure takes place because people make poor choices. In most cases these choices are avoidable. Here are a few of the most commonly made mistakes businesses make while vying to be a successful franchise.

Failure to Develop an Effective Plan

The single greatest mistake a business makes while struggling to become a successful franchise is the failure to develop an effective plan. Many business owners expect lawyers to draft franchise plans and place little importance on the major business decisions contained in the documents detailing the plans.

There are a multitude of make-or-break decisions that business owners make when creating a franchise. These decisions may seem small initially, but this is an illusion. Unfortunately most small franchise mistakes are duplicated over and over until they inevitably cost the franchiser an arm and a leg.

Playing Follow the Leader

Too many franchise owners observe the successes of other companies and mistakenly believe that if they duplicate the actions of those franchises, they will achieve similar successes. This is far from what actually takes place. No one ever wins the game by playing follow the leader; franchises must stand out from all the others in order to be successful.

Competing franchise strategies should never be duplicated. There are occasions where the models may be flawed, and franchisers could very well be duplicating their way to failure. However, even when the strategies are sound, the emerging franchise’s circumstances are always different. Duplicating a business strategy isn’t a sound strategy, and in most cases, it’s a recipe for failure.

Doing Bad All by Yourself

Virtually all emerging franchisers share a primary common factor. They’ve been running a successful business for some time now. Most franchisers are successful entrepreneurs who are competent, resourceful, and accustomed to having to handle all the pressing issues. Most figure that since they initially built their business without any help, why would franchising be any different?

Developing a franchise requires expertise that most business owners don’t have. Additionally, trying to develop the franchise while running a business full time is next to impossible. Franchise development involves strategic planning, budgeting, organizational development, legal documentation, training, marketing, and selling. Most business owners already have their hands full running the business, adding franchise development to the mix is simply asking for too much.

Poor Financial Planning

Becoming a franchise can be a method to grow your business at a rapid rate, while expending a minimal amount of cash. Franchising may be a low cost method of growth, but most business owners need to be reminded that it’s not a “no-cost” method of growing their businesses.

In order to develop a successful franchise, franchisers must sets aside funding for development, writing operations manuals as well as other publications, and marketing efforts. Legal fees are another associated expense, as well as state registrations for the business. These expenses may be minimized for owners who only plan to sell a couple of franchises, but for those individuals who have more aggressive goals, the costs can be exponential.

Failing to Say No

Franchisers who have expended a great deal of money preparing for franchising, can be tempted to say yes to the first candidate who walks through the door with a fat check. This can be a huge mistake, especially when it’s so early in the game. The first few candidates accepted into a franchising program are the foundation for all of the following franchise efforts.

Many times these first few sales end up being the most regrettable for franchisers. By avoiding this mistake from the start and holding candidates to the highest of standards from inception, franchisers can establish a strong and successful brand for years to come.

Failure to Focus on Shared Success

It appears that many franchisers seem to forget that in order for their franchising efforts to be successful, their franchisees must experience success as well. Focusing on rapidly growing a business and overlooking the health of the most vulnerable members of the franchise will inevitably lead to the failure of the franchise as a whole.

Franchises are entities comprised of interconnected members. Successful members are capable of paying more royalties while requiring less support. Franchisees that are failing cost more, pay very little, and don’t provide good public relations for the franchise as a whole. Multiple failing franchisees can make continued growth more difficult. It pays to ensure that fledgling franchisees are successful.

 
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