5 Mistakes Franchisees Make When Starting Out

The franchise business model is quite attractive to those looking to dip their toes in the entrepreneurial waters. As a franchisee, you have access to a proven business, operational support, marketing efforts, and other resources. However, you are somewhat constrained by the rules laid out by your franchisor. For instance, you’ve probably eaten at at least a few different McDonald’s locations in your lifetime. How different was one location from another? 

Becoming a franchisee is still rewarding to thousands of Floridians. After all, you’re still accountable for turning a profit and achieving long-term success. In that pursuit, franchisees should steer clear of these five potential perils. 

  1. Rushing through the due diligence process. Once you’ve contacted a franchisor about your interest in becoming a franchisee, they assume you’ve already done a fair amount of research. And, that should be the case if you are genuinely interested. After you contact a franchisor, you’ll receive the Franchise Disclosure Document (FDD). This form has exhaustive information that’s useful to potential franchisees. Read every word of the FDD and have an attorney review it before you sign. 
  2. Underestimating the financial obligations. The amount of money you need to start a franchise — at least according to many internet sources — is often misleading. As with any significant financial transaction, there are hidden costs involved in purchasing a franchise. The FDD will provide some clues, but you should also speak to current and past franchisees to get a more complete understanding of your future investment. 
  3. Not accepting the loss of control. As we mentioned previously, the bargain of franchises is simple: you receive institutional support in exchange for a partial loss of autonomy. Becoming a franchisee is not right for every aspiring entrepreneur. If you don’t think you will be able to handle these circumstances for the long haul, pause to consider whether franchising is what will satisfy you. 
  4. Choosing the trendy franchise. For the most part, successful business owners aren’t distracted by shiny objects. This trait serves franchisees well when picking a franchise to start. The general rule is to stay away from franchises that have not had sustained success in multiple territories for at least five years. Some more risk-averse franchisees seek even more assurance of a franchise’s success than those parameters. Think about the chances of your franchise being successful in the long haul. 
  5. Neglecting to put in the work. Again, it’s nice to be able to lean on an infrastructure as a franchisee. However, your franchise will not grow by itself just because you’re operating a recognized brand. It’s up to you, as the franchisee, to generate interest and a customer base. 

Conclusion

Franchisees deserve strong support from franchisors, and ultimately, a fair arrangement that allows them to feel satisfied with their work. Getting there is nearly impossible without the help of an experienced and knowledgeable business law firm like Trembly Law Firm. We have helped numerous franchisees (and franchisors) set up their businesses the right way. Our firm looks forward to hearing from you soon. 

Trembly Law

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