Buying a Franchise can be a good way to start your business, but consider 7 common pitfalls when making your choice.
Buying a ready-made franchise is a great way to go into business for yourself. However, when choosing the franchise that is right for you, there are many blunders that can be made along the way. To help you get started on the right foot, and avoid many pitfalls that could plague a franchised business, here are 7 mistakes you should know about and avoid.
1. Buying the hype. Think of franchises as any other product. You may see ads claiming one franchise is the best and that it’s a guaranteed success. However, a franchise is a business venture, and there really is no such thing as a sure thing. Not all franchises are equal, and not all will be an instant success or will last.
2. Not doing market research. It’s not uncommon to get caught up in the excitement of choosing a franchise that interests you, only to forget to measure actual market. Even though a franchise seems great to you, not doing research on the how well it will do in the marketplace is a huge mistake.
3. Buying the newest thing on the market. While buying the newest and hottest smart phone is a good thing, buying the newest franchise may not be. The reason to buy a franchised business is for the proven record that comes with the brand name. Putting your money into a new franchise that is still up-and-coming is a risky move, no matter how good the business sounds.
4. Not having an emergency fund. When buying a franchise, you will need to pay the franchise costs, plus any fees and ongoing royalties and other fees to the franchisor. While it is the franchisors duty to do the marketing and advertising for the brand, you should have your own back-up emergency fund just in case you don’t start turning a profit as soon as you hoped.
5. Not having an exit strategy. Before you tie up your money in a franchise, read over and understand the terms of the contract. What will happen should you decide to close the business before your contract is up? What about if your business should go bankrupt? While these are not ideal situations, they are possibilities and you should know what you will do in the event they do happen.
6. Not hiring a franchise advisor. Buying a franchise is a huge investment that will cost you thousands of dollars. Do not try to cut corners by skimping on legal advisors. A good franchise attorney can help you understand the terms of the contract, what you can negotiate and what you should avoid. When we were looking at Wine & Design franchise opportunities we sought all the help we could get. You can’t afford to not have allies in these ventures.
7. Assuming the franchisor is an ally. While most parent franchisors are willing to work with you and help you, not every one may have your best interest at heart. There are certain legal intricacies that you must keep in your mind in such cases. You must have a peek here to find the best attorneys that can come to your aid. Remember that this is a business, and the franchisor is going to do what he can to protect his own interests.
Steps to Franchising a Business | Brad Denton
Opening a franchise can be a good way to running your own business. Choosing which franchise to buy, however, is no easy feat. There are many mistakes that could be made along the way. Use this list as a starting point to help you make wise decisions about which franchise you want to purchase and don’t forget to see the opinions of business and legal advisors.
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