Starting a franchise can be scary. While having the backing of a popular brand might seem like an asset, it can also work against you if the parent company has failed to provide proper support, or if it’s gone out of business entirely (it happens more often than you might think). For help in choosing a franchise that will really take off, check out these most common failures in franchise operations, and what you can do to avoid them!
Ignoring Franchisor Guidelines
When it comes to starting a franchise, don’t set up shop until you’ve read and understood your franchisor’s operating guidelines. Ignoring their advice can land you in legal hot water, particularly if they have told you not to open a second location within 100 miles of your first.
Poor Planning, Lack of Execution and Follow-through
The number one reason why franchise fail is poor planning, lack of execution and follow-through. It’s called lack of attention to detail and it results in growing pains. The first failure is that they failed to create a business plan because they assumed they could wing it or they were in such a hurry to get going that they just jumped into it without thinking through their idea and then never looked back! Did you know that 95% of all businesses fail within 10 years?
Failure to Establish an Effective Management System
This goes back to outsourcing and delegation, but it is also rooted in common sense. There are tons of details that go into running a franchise, and if you don’t establish a clear management system when it comes to how franchisees should handle those details, there will be major headaches down the road. This can lead to failure for both parties involved.
Underestimating the Competition
Many entrepreneurs go into business thinking they’re going to be better than everyone else. In franchising, it’s crucial that you do your homework before entering a market—particularly when you’re in direct competition with an existing company. Do your research and make sure you understand what your competitors offer (and don’t offer), as well as their pricing structure and marketing tactics. Remember, their strengths may be a weakness for them; use them to your advantage!
Not Listening to Customers
Making sure your customers are happy and taken care of is crucial. If you’re not listening to what they want, they will go elsewhere. The satisfaction of your customers should be at a high priority in your business model, otherwise it’s just a short-term strategy that will be unsuccessful in a long run.
Not Having Adequate Capitalization or Financial Resources
When starting a new business, you need to have enough capital and financial resources on hand to handle your start-up costs, including day-to-day expenses like salaries for yourself and employees. In addition, you’ll want to build an emergency fund that’s stocked with enough money to keep your business afloat in case of any unexpected changes or events. You can also check out our guide on how much money it takes to start a small business .
Misaligned Goals Amongst Partners
Partnerships are great, but when you decide to go into business with someone else, it’s important that you not only share similar views and goals, but also work well together. If there is a deep lack of communication or effective problem-solving abilities amongst partners, your chances of success are much lower.