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Worst Franchise Fails
Ensure that your Business is a Success

Franchise Finder

Many business owners see franchising as an easy way to make a buck. Epic fail -franchising is no get-rich-quick scheme! In fact, it’s quite the opposite – a long, hard slog awaits those who decide to take their business to the next level by franchising it. To succeed, be sure to avoid these top five franchise mistakes…

#1 – Failing to Build Your Own Business, First
Here at Franchise Finder we see this phenomenon all too often – entrepreneurs with unproven start-ups in the incubation phase who leap headfirst into a franchise model. First things first – be sure to focus on building up a successful business before you even think about franchising it. Not only do franchisees want to become part of a proven business model but, as a franchisor, you will need to know your own business inside out – from industry trends to the nitty-gritty of day-to-day operations.

#2 – Expanding Too Quickly
You may have been a successful restaurateur for the past ten years, but just because you have managed to build up one thriving restaurant business doesn’t mean that opening up a chain of facsimile restaurants will work. The reality is that remarkably few franchisors are able to get franchising right. In fact, it’s estimated that only one in four franchise concepts in America survive over a ten-year period. That’s because, too often, franchisors expand too rapidly or beyond what they’re actually good at. Organic growth is often the very best way to scale your enterprise – focusing on building one business, then a second, then a third, slowly-slowly adding building blocks on top of a very solid foundation.

#3 – Failing to Get Your Legal Ducks in a Row
Imagine working hard to build up your business, only to have someone come along and rip off your (unprotected) intellectual property, or wiggle their way out of royalty fees due to a loophole in (or no) contract. Unfortunately, business being business and people being people, there are always those out there who will try and pull a fast one, so if you’re considering welcoming other parties on board your business concept – in the form of franchisees – be sure that all the legal details have been taken care of. Remember, too, that franchisors now have to comply with certain provisions set out in the new Companies Act.

#4 – Not Choosing the Right Franchisees
Having the right people represent and build your franchise brand is crucial. To select only the finest candidates, have a strict franchisee screening process in place – your requirements should include things like the level of financial investment a candidate can make; their education and training, whether they have any experience in your particular nîche market and their work ethic and character.

#5 – Not Nurturing the Franchisor-Franchisee Relationship
At the heart of every franchise business are the people who work in it. Focus on developing and investing in people and your franchise will bloom; zone in on profit and the expense of people and it will be doomed! Avoid devastating franchisor-franchisee conflict by taking the time to get to know your franchisees, offering on-going support and training, providing a platform where they can express suggestions and gripes and ensuring the free flow of communication between head office and your franchisee outlets.

#6 – Pegging the Franchise Fee at the Wrong Level

Setting your franchise fees is a delicate balancing act. Too high, and your franchisees will have little room for profit and the barrier to entry for new franchisees will be too high; too low, and you’ll have insufficient funds to provide your franchisees with the services and support they need and insufficient resources to grow your brand. Rather than make a guestimate, enlist the help of a seasoned franchise consult to assist you with financial modelling for your franchise.

Author: Franchise Finder, Online Directory of Franchises and Business Opportunities in South Africa


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