4 Franchising mistakes to avoid
Franchising is a continuing relationship in which a franchisor / established company licenses another party /franchisor to sell its products, goods or services under its brand name and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. The best part of franchising is that you get a readymade business with tried and tested system of operations and trainings. It is the fact that franchising is growing faster than most other sectors in the Indian economy. Consequently, the franchise business is becoming increasingly popular among domestic and international players across many sectors. If you too are considering to enter into the franchising business, there are several things you should be aware of right from the get-go. You cannot ignore the challenges and nuances entailed in franchising for if you do, it may have its repercussions. Here is the list of mistakes that must be avoided to build a profitable business without slipping up.
1. UNDERCAPITALIZING:
Like most other businesses, in franchising too, it’s important for you to have adequate funds available. Unless you’re independently moneyed, you would need to secure financing to fund your new franchise. To cover all the startup costs and also the cost of running the business for at least the first year, it’s important that you get the right type of financing and right amount of money. It is inevitable to properly plan out a budget for both the development process and post-launch franchise sales process for if it remains absent, you may not be left with anything else but franchise agreement. The good thing is that franchising is entirely scalable and a franchise system can be rolled out gradually. Hence, you should never underestimate the capital needed for the business to thrive. Besides initial investment required to establish the franchise system, franchisors should also ensure that they have sufficient funds available to support the new franchise system especially during the initial space of time i.e. 6-12 months.
2. DON’T MISS TO CONSULT AND REACH OUT TO EXISTING FRANCHISEES:
In franchising, it’s extremely crucial for both franchisor and the new/would-be franchisee to reach out and consult the existing franchise owners. For franchisors, the existing franchise partners are the source of referral for many other new and quality franchisees looking out for a brand to shake hands with. The word of mouth of the existing franchisee carries a lot of weightage and significance for a very simple reason that their experience in the journey of franchising would be considered way more seriously by the aspirant entrepreneurs and franchisees. In case of new franchisees who are in search of reputed and quality brands, it is advisable to them that they consult the existing franchise owners before buying the franchise. Contacting current franchisees is an important step in the process of research and you can’t afford to ignore it. From their experience, they can provide you a novel perspective and address your queries and questions, if any. Since there is no one who can give you better advice than the people who are already in the business, consulting these franchise owners would not only help you get their advice and insight but estimate costs of setting up and operating the business. In a nutshell, all the information needed before investing can be gotten from the first-hand experience of the current franchise owners. Hence, you cannot ignore to reach out and consult the existing franchisees.
3. NOT FOLLOWING THE FRANCHISOR’S SYSTEM AND CARRYING UNREALISTIC INDEPENDENCE EXPECTATIONS:
Franchisor provides you with clear set of rules to follow and franchise systems to ensure consistency in the quality of products/services among all franchise units. When these set of rules and franchise system are not followed, unnecessary mistakes are bound to be committed and the outcome is often a failure. Before buying a franchisee, it’s important for you to ensure that you have the right mindset and you’re mentally prepared and up to implement the provided operating system and follow the given set of instructions.
4. DON’T RUSH THROUGH RESEARCH AND DUE DILIGENCE:
You can’t just decide to get into the franchise business, just because you’re a loyal customer of a particular brand. Being passionate about a brand is not a bad attribute when you want to buy the franchise however you cannot take a decision without adequate research and due diligence. Before investing, it is important that you do your homework, research about the popularity of their service or product, the owner and his or her credentials, what is the media talking about the franchisor, whether support and training system are on track, what effort you will need and what your expectations as an owner should be. Contacting the existing franchise owners to get first-hand information about their experience as a franchisee, visiting locations to observe the reality of the situation on the ground, developing detailed business plan regarding operation of the business and consulting bankers, lawyers, accountants or business consultants, all are also a part of the research work to be done before investing in the business.
To conclude with, it can be said that running a franchise network is a great way to expand a business lucratively; however, challenges are bound to be there in the journey. Being aware of the upcoming challenges and avoiding the aforementioned mistakes, can definitely make the journey smoother and easygoing. Franchise Insider, as a resource for professionals in the franchising world and aspiring entrepreneurs, is always eager to address your queries related to franchising. Speak to us today. For further details, please contact us at:
Email id: support@franchiseinsider.in
Website: www.franchiseinsider.in
Phone: +91 6351238956
